Jyothy Laboratories
BSE SENSEX
27,035
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
S&P CNX
8,349
JYL IN
182
62.6 / 0.9
381 / 253
-3/22/13
47
33.1
20 January 2016
3QFY17 Results Update | Sector: Consumer
CMP: INR345
TP: INR365 (+6%)
Neutral
Resilient sales in a difficult environment; fabric care shines
Consolidated net sales rose 3.3% YoY
to INR3.83b (Ind-AS; est. of +1% YoY to
INR3.76b). Overall volumes grew 3.6% YoY. Power brand sales rose 2.1% YoY,
with 2.6% volume growth. EBITDA declined 1.3% YoY to INR507m (est. of -10%
YoY to INR468m). PAT grew 6.6% YoY to INR215m (est. of 218m).
Consolidated gross margin contracted 290bp YoY
to 45.6% (est. of 47.4%), as
higher crude prices led to increased costs. However, savings on staff costs
(-50bp YoY) and lower A&P (-110bp YoY)/other expenses (-70bp YoY) restricted
consolidated EBITDA margin contraction to 60bp YoY to 13.2% (est. of 12.4%).
Segment-wise performance:
Fabric care sales grew 10.4% YoY, followed by
Dishwashing (+2.2%) and personal care (+1.4%). Mosquito repellent sales
(-15.2%), however, came in much lower than expectations. Among the major
brands, Ujala sales grew by 7.5% YoY, Henko by 20%, Exo by 2% and Pril by
2.7%. However, sales of Maxo (-15.2%) and Margo (-6%) disappointed.
Concall highlights:
(1) 3QFY17 was impacted by demonetization, but overall
demand is back to normal. (2) Input costs have started rising. Expect 5-7% price
increase/grammage reduction in 4QFY17 to protect margins. (3) A&P will be
back on track in 4Q at ~7-8% of sales (Ind-AS). (4) Henkel deal: 31
st
March 2017
is the deadline; can be extended by a couple of weeks if required.
Valuation and view:
JYL exhibited reasonable resilience in volume growth,
especially in a tough business environment post demonetization. However,
valuations are fair at 38.4x FY18 EPS and 22.4x FY18 EV/EBITDA. Upside on our
target price of INR364 (22x December 2018 EBITDA) is limited. Potential
speculation around Henkel call option will overshadow the underlying
fundamentals in the near term, in our view. Maintain
Neutral.
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E 2019E
Net Sales
16.6 17.8 20.2 23.3
EBITDA
2.2 2.6
2.9
3.2
PAT
0.7 1.4
1.6
1.9
EPS (INR)
4.1 7.6
9.0 10.5
Gr. (%)
-41.7 84.7 18.6 16.8
BV/Sh (INR) 46.7 49.8 54.3 60.4
RoE (%)
9.1 15.7 17.2 18.3
RoCE (%)
7.2 12.5 13.8 14.7
P/E (x)
84.1 45.5 38.4 32.9
EV/EBITDA
30.1 25.4 22.4 19.9
Estimate change
TP change
Rating change
Krishnan Sambamoorthy
(Krishnan.sambamoorthy@motilaloswal.com
); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@motilaloswal.com ); +91 22 3980 4261
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Jyothy Laboratories
Key quarterly charts
Exhibit 1: Category wise consolidated sales
Category
Fabric Care
Dishwashing
Household Insecticides
Personal Care
Other Products
Total
Laundry Service
Grand Total
* Sales are net of Excise duty
Q3FY16
1,566
1,222
534
343
81
3,746
130
3,876
Q3FY17
1,729
1,249
453
341
95
3,867
128
3,995
% Change
10.4
2.2
-15.2
-0.6
17.3
3.2
-1.5
3.1
Source: Company, MOSL
Exhibit 2: Brand wise consolidated sales
Brand
Ujala
Henko
Exo
Pril
Maxo
Margo
Total Power Brand
Others
Total
Laundry Services
Grand Total
* Sales are net of Excise duty
Q3FY16
914
363
929
297
534
297
3,334
411
3,745
130
3,875
Q3FY17
% Change
983
7.5
436
20.1
948
2.0
306
3.0
453
-15.2
279
-6.1
3,405
2.1
462
12.4
3,867
3.3
128
-1.5
3,995
3.1
Source: Company, MOSL
Key takeaways from the conference call
Demonetization impact
North and East business still remains challenging. Wholesale is much larger part
in these regions. Wholesale channel for Jyothy is 40% of sales. In November
wholesale channel sales were nearly zero after 8
th
November.
In December wholesale channel 75% back to Normal in South and East. In North
and East they will be at 50% of Normal. East is a particular problem.
Management believes demand will come back.
Consumers went on cash conservation mode and postponed discretionary
purchases.
Jyothy’s response to demonetization
Set up a daily monitoring cell at their office.
Focused on superior servicing especially in towns above 500,000 people.
Altered production plans to maximize production of small SKUs.
Did not extend any channel credit.
Company’s increased focus on modern trade also paid off.
November- Stemmed negative impact to 9% overall and 17% in General trade.
General trade was actually positive in December. Overall 13% growth in
December. Seeing double digit sales growth continuing in January. Part of these
sales may be channel filling.
Management believes that unorganized segment will continue to suffer.
Cut A&P in 3QFY17 to arrest margin impact. Did not hold back on innovation
however.
20 January 2017
2

Jyothy Laboratories
Input costs are going up affecting gross margins severely in 3QFY17. The
company held prices due to the difficult situation. Will take price increases in
4QFY17. Have already started price increases and grammage reduction.
Confident that gross margins will not dip YoY in 4QFY17. Expect 5-7% price
increase/ grammage reduction.
Appointing more distributors in smaller towns in North and East to check impact
on wholesale channel.
Key segment highlights
Fabric Care sales grew by 10% YoY and was helped by Henko which has a much
larger modern trade component and is mainly an urban product.
House Hold Insecticides has a large component in the wholesale channel
particularly in North and East and hence the 15% decline YoY.
Maxo for now struggling is a reality. Dip on EBIT margins was because both coils
and liquids suffered in 3QFY17 and there was no mix improvement. There will
be innovation in liquid vaporizer and continued A&P support behind this
segment.
Ujala Crisp and Shine growing at 20%. FY18 sales target INR 1bn. Sales was INR
409m in YTD FY17
Brands that need overhaul- Margo, will be restaged significantly going forward.
Ujala detergent will be rolled out to TN as well just like Crisp and Shine was.
Henko Matic 16% market share in Kerala.
Other key points
4QFY17 21% tax rate likely. FY18 also 21% tax rate guided for.
North East Capex will be as expected. 21% tax guidance is including tax benefits
from these units. Large part of manufacturing of key products will be shifted to
these units.
Amalgamation of subsidiary- Some final approvals awaited, expect this before
31
st
March 2017. Will have further tax benefits if the approval comes through.
A&P will be back on track in 4Q around 7-8% of sales (IND-AS).
Direct reach is just below 1 m outlets.
Henkel Deal
st
31 March 2017 is the deadline. Can be extended by a couple of weeks if
required.
Valuation and View
Company did well to report reasonable resilience on volume growth in a difficult
operating environment after implementation of demonetization. Valuations are
however fair at 38.4xFY18 EPS and 22.4xFY18 EV/EBITDA. Upside on our target
of INR364 (22x December 2018 EBITDA) is limited.
Potential speculation around Henkel call option will overshadow the underlying
fundamentals in the near term, in our view. Maintain Neutral.
20 January 2017
3

Jyothy Laboratories
Exhibit 3: Changes to the model have resulted in 5% change in FY17 and FY18 EPS
FY17E
17,814
2,587
1,371
New
FY18E
20,174
2,902
1,626
FY19E
23,256
3,242
1,899
FY17E
17,437
2,473
1,305
Old
FY18E
19,754
2,841
1,538
FY19E
22,779
3,185
1,820
FY17E
2.2%
4.6%
5.1%
Change (%)
FY18E
2.1%
2.1%
5.7%
FY19E
2.1%
1.8%
4.3%
Sales
EBITDA
PAT
Source: Company, MOSL
Exhibit 4: Valuation Matrix of coverage universe
Company
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
HUL
ITC
Jyothy Labs
Marico
Nestle
Page Industries
Parag Milk
Pidilite Inds.
P&G Hygiene
Radico Khaitan
United Brew.
United Spirits
Retail
Jubilant Foodworks
Shopper's Stop
Titan Company
Reco
Price
(INR)
Mkt Cap
EPS Growth YoY (%)
(USD M) FY16 FY17E FY18E
13,584
5,420
3,592
7,117
3,321
7,707
3,091
27,318
45,215
915
4,831
8,329
2,331
322
4,709
3,316
225
3,129
4,428
819
350
4,696
26.3
46.3
8.7
17.2
17.7
24.4
20.4
12.9
-3.5
-41.7
26.1
-7.3
18.7
-66.7
47.3
22.0
3.9
12.8
LP
-11.7
19.3
-13.4
7.7
0.8
-0.4
0.8
-1.9
10.8
-5.6
3.6
8.5
84.7
6.4
-7.0
18.6
4.6
10.9
6.6
-23.5
11.2
66.0
-28.1
-47.7
8.9
12.2
16.3
22.4
18.5
23.6
19.0
13.4
13.7
14.3
18.6
21.1
24.8
26.4
37.7
12.2
22.0
33.8
32.6
64.5
72.3
201.0
11.5
P/E (x)
EV/EBITDA (x)
RoE (%) Div. (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16
FY16
51.6
44.0
40.3
38.7
39.6
46.5
30.0
45.2
33.1
84.1
45.6
49.1
68.3
38.8
42.5
53.6
16.8
72.8
124.2
56.7
49.9
44.9
47.9
43.7
40.5
38.4
40.4
42.0
31.8
43.6
30.5
45.5
42.8
52.8
57.6
37.2
38.3
50.3
22.0
65.4
74.9
78.9
95.4
41.3
42.7
37.5
33.1
32.4
32.7
35.3
28.0
38.4
26.7
38.4
35.3
42.3
45.6
27.0
34.1
41.2
16.4
49.4
45.5
45.8
31.7
37.0
32.7
31.4
25.5
31.0
33.9
34.5
19.4
31.6
21.1
30.1
31.3
34.5
42.3
15.0
25.8
35.6
11.4
32.1
39.0
20.7
12.1
37.1
30.4
31.3
24.2
30.9
30.0
31.9
21.8
30.6
20.2
25.4
29.4
31.2
37.6
15.8
25.0
32.7
12.5
31.2
36.4
22.4
17.9
30.6
27.3
26.5
19.9
25.9
25.6
27.7
18.9
26.9
17.4
22.4
24.4
24.8
29.0
12.7
22.1
26.0
11.3
25.0
26.6
15.8
10.6
27.5
34.7
55.9
67.9
33.3
43.4
23.4
30.8
82.4
29.3
9.1
36.9
40.9
46.0
19.5
29.9
30.8
10.3
14.8
19.8
13.4
6.3
21.3
0.9
0.6
1.2
0.7
0.8
0.6
1.1
1.9
2.7
1.2
1.3
0.8
0.6
0.0
0.7
0.5
0.6
0.1
0.0
0.3
0.0
0.7
Neutral 966
Buy
3,082
Buy
901
Neutral 276
Buy
998
Neutral 1,544
Neutral 5,012
Neutral 861
Buy
255
Neutral 345
Buy
255
Neutral 5,891
Buy
14,250
Neutral 261
Buy
626
Buy
6,967
Neutral 116
Buy
807
Buy
2,078
Neutral
Neutral
Neutral
849
291
361
Note: For Nestle FY16 means CY15
Source: Company, MOSL
20 January 2017
4

Jyothy Laboratories
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Other Operating Income
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT after EO Exp.
Current Tax
Tax Rate (%)
Less: Minority Interest
Adjusted PAT
Change (%)
FY13
11,042
21.0
18.0
11,060
21.1
9,760
88.4
1,299
11.8
224
1,075
682
50
12
-149
-1199.0
35
591
53.6
FY14
13,184
19.4
54.7
13,239
19.7
11,667
88.5
1,572
11.9
243
1,329
553
82
815
2
0.3
2
856
44.8
FY15
15,053
14.2
95.4
15,148
14.4
13,518
89.8
1,630
10.8
325
1,305
138
99
1,204
-6
-0.5
1
1,272
48.7
FY16
16,575
10.1
20.2
16,595
9.6
14,369
86.7
2,227
13.4
314
1,913
618
141
1,435
693
48.3
44
742
-41.7
FY17E
17,814
7.5
22.2
17,837
7.5
15,249
85.6
2,587
14.5
317
2,270
628
139
1,781
410
23.0
40
1,371
84.7
(INR Million)
FY18E
20,174
13.2
24.4
20,199
13.2
17,297
85.7
2,902
14.4
343
2,559
660
160
2,058
432
21.0
40
1,626
18.6
FY19E
23,256
15.3
26.9
23,283
15.3
20,041
86.2
3,242
13.9
362
2,880
660
183
2,403
505
21.0
40
1,899
16.8
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans & Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances & Others
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
FY13
161
6,224
6,386
49
9
6,277
12,721
12,407
1,783
10,624
194
15
4,349
1,722
804
478
1,346
2,460
719
872
869
1,889
12,721
FY14
181
7,163
7,344
16
11
6,781
14,152
12,960
2,019
10,941
160
610
4,825
1,738
668
706
1,712
2,383
622
920
841
2,442
14,152
FY15
181
7,616
7,797
14
5
7,310
15,126
12,976
2,236
10,740
177
1,935
5,315
1,852
574
792
2,096
3,041
800
896
1,345
2,273
15,126
FY16
181
8,280
8,461
17
253
6,116
14,848
13,104
2,426
10,678
177
835
5,983
1,827
941
648
2,567
2,825
1,031
1,042
752
3,158
14,848
FY17E
181
8,844
9,025
17
253
6,116
15,410
13,354
2,743
10,610
177
835
7,564
1,980
707
2,026
2,852
3,777
919
1,303
1,555
3,788
15,410
(INR Million)
FY18E
181
9,662
9,843
17
253
6,116
16,229
14,104
3,087
11,017
177
835
8,538
2,102
761
2,679
2,996
4,338
1,061
1,628
1,648
4,200
16,229
FY19E
181
10,753
10,934
17
253
6,116
17,320
14,854
3,448
11,405
177
835
9,932
2,423
877
3,237
3,395
5,029
1,223
2,036
1,771
4,903
17,320
20 January 2017
5

Jyothy Laboratories
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Working Cap. Turnover (Days)
Debt/Equity
FY13
3.6
4.9
39.6
2.5
82.2
FY14
4.7
6.1
40.6
3.0
74.3
72.9
56.8
8.5
5.1
43.2
0.9
1.2
12.5
10.5
10.7
0.9
48.1
18.5
32.7
48.0
0.9
FY15
7.0
8.8
43.1
4.0
66.6
49.0
39.1
8.0
4.4
41.1
1.2
9.1
16.8
9.7
10.5
1.0
44.9
13.9
37.6
35.9
0.9
FY16
4.1
5.8
46.7
4.0
114.2
84.1
59.1
7.4
4.0
30.1
1.2
0.4
9.1
7.2
7.8
1.1
40.2
20.7
42.0
55.3
0.7
FY17E
7.6
9.3
49.8
4.0
61.8
45.5
37.0
6.9
3.7
25.4
1.2
12.3
15.7
12.5
13.7
1.2
40.6
14.5
34.9
36.1
0.7
FY18E
9.0
10.9
54.3
4.0
52.1
38.4
31.7
6.3
3.2
22.4
1.2
8.3
17.2
13.8
16.2
1.2
38.0
13.8
34.9
27.5
0.6
FY19E
10.5
12.5
60.4
4.0
44.6
32.9
27.6
5.7
2.8
19.9
1.2
7.8
18.3
14.7
17.8
1.3
38.0
13.8
34.7
26.1
0.6
0.7
-5.4
9.4
119.5
120.3
0.9
56.9
26.6
44.9
46.7
1.0
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
CF from Operating incl EO
(inc)/dec in FA
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
E: MOSL Estimates
FY13
197
224
-152
-543
-274
-274
-594
0
-594
190
617
-486
341
664
-205
680
475
FY14
814
243
2
-324
736
736
-527
-595
-1,121
779
504
-635
-33
615
229
475
704
FY15
1,211
325
-6
254
1,785
1,785
-142
-1,326
-1,468
0
529
-847
90
-229
88
704
793
FY16
786
314
248
-1,029
319
319
-252
1,100
849
519
-1,694
-848
710
-1,313
-145
793
647
FY17E
1,411
317
0
748
2,477
2,477
-250
0
-250
501
-501
-848
1
-848
1,379
647
2,026
(INR Million)
FY18E
1,666
343
0
241
2,250
2,250
-750
0
-750
501
-501
-848
0
-848
652
2,026
2,679
FY19E
1,939
362
0
-145
2,156
2,156
-750
0
-750
501
-501
-848
0
-848
558
2,679
3,237
20 January 2017
6

Jyothy Laboratories
Corporate profile
Company description
Exhibit 1: Sensex rebased
Jyothy Labs was founded in 1983 by Mr M P
Ramachandran in Thrissur, Kerala. Traditionally a
single product company (Ujala Supreme), JYL has
grown to be a multi-brand, multi-category player,
with operations all over India.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Dec-16
Promoter
DII
FII
Others
66.9
10.9
13.3
8.9
Sep-16
66.9
9.7
13.1
10.3
Dec-15
66.7
9.3
14.8
9.2
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Icici Prudential Life Insurance Company Ltd
Fidelity Investment Trust - Fidelity Series
International Small Cap Fund
Emblem Fii
Parvest Equity India
Hasham Investment And Trading Company
Private Limited
% Holding
3.3
2.0
1.7
1.5
1.4
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
M P Ramachandran
S Raghunandan
M L Bansal
K Ullas Kamath
Designation
Chairman & Managing Director
Whole Time Director & CEO
Company Secretary
Joint MD & CFO
Exhibit 5: Directors
Name
Bipin R Shah
Nilesh B Mehta
M R Jyothy
Name
K P Padmakumar
Ramakrishnan
Lakshminarayanan
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Mahajan & Aibara
R Nanabhoy & Co
Rathi & Associates
S R B C & Co LLP
Internal
Cost Auditor
Secretarial Audit
Statutory
Source: Capitaline
Type
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
7.6
9.0
Consensus
forecast
9.4
11.6
Variation (%)
-18.9
-22.6
Source: Bloomberg
20 January 2017
7

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8