Jyothy Labs ~ Post acquisition of Henkel India

Stock Opportunities Untested - but worth a good look
82

Q4FY20 Earnings Call highlights:

Participants:

  • IIFL Securities
  • Investec
  • Macquarie
  • Spark Capital
  • Sharekhan
  • Antique Stock Broking
  • Centrum Capital

Business Overview:

  • Revenue at Rs 393 crore vs Rs 516 crore YoY
  • Gross Margin at 45.7% vs 45.2% YoY
  • EBITDA margin at 10.3% vs 15.8% YoY
  • PAT at Rs 27 crore vs Rs 67 crore YoY

ConCall highlights:

  • Jyothy Labs Ltd (JLL) has reported positive growth in April and May 2020
  • Manufacturing operation is back to 80% of pre-Covid level; all state depots are open. JLL were at 40-50% capacity at the end of April
  • JLL has partnered with alternate distribution companies - JumboTail, Udaan, ElasticRun, etc and last mile delivery partners like Dunnzo, Zomato and Swiggy
  • Company launched ‘DISTIMAN’ retailer mobile app to facilitate orders directly from retailers to distributors
  • JLL produce 80% of goods from own manufacturing plants and the sales force is on direct payroll
  • Fixed employee cost adversely impacted EBITDA by 2.5% and media cost which was pre-committed has adversely impacted EBITDA by 2.8%
  • JLL to launch Ujala Crisp and Shine in nearby states of Kerala
  • Household Insecticide (HI) sales has seen good pick up in the month of April and May; market share has increased in the last few quarters
  • Company has launched Margo hand sanitizer in just 21 days and currently is in strong demand; JLL has also launched hand wash early this quarter
  • JLL has witnessed some dip in Ujala fabric whitener as people are not going out as much
  • 40-50% of raw material cost is linked to crude oil prices
  • Demand for Household Insecticides has been very good this year as people are very cautious and the season has been extended by 3-4 weeks
  • Exo anti-bacterial dish wash has done well
  • In personal care segment, Margo has done very well in the last two months
  • Secondary sales is doing much better than primary sales
  • GT is doing fine; 85-90% distributors are back. Modern trade is also picking up
  • Company has guided 15-16% EBITDA margin for FY21
  • Demand for lower unit packs (LUP) has increased. Contribution of LUP in overall portfolio is around 25%. LUP helping the company to gain market share in certain markets
  • T-Shine is currently available only in Kerala and company is planning to take it to nearby states. Company has changed the packaging and new communication has also gone on air. JLL has already launched T-Shine floor cleaner in nearby states
  • Ujala fabric whitener is available at 3 million retail outlet and direct reach is around 8.5 lakh retail outlet
  • When JLL bought Margo brand it was Rs 40 crore brand now it is around Rs 200 crore brand
  • 20% of business from modern trade and CSD; credit period for modern trade is around 20-30 days and for CSD it is around 60 days but due to Covid credit period gets stretched for CSD
4 Likes
83

Promotor released pledged shares.No more Pledge share now :slight_smile: 629B50C0_9704_43E1_8AE0_AF9207025060_162418.pdf (680.7 KB)

2 Likes
84

Q1 results results.pdf (5.9 MB)

85

Very good results indeed.

The growth in insecticides and dish washing segment is encouraging.

GCPL has reported similar growth in the Insecticides segment. Looks like the competition from illegal Agarbattis is abating…an encouraging sign.

Going fwd…perfrofmance of Henko and Ujala detergents remain a key. If they start firing, the stock may fly.

2 Likes
86

Jyothi

Key concall takeaways

 Covid update. JYL resumed operations from mid-April 2020 and scaled up gradually.
Current production and supply chain operations are almost at the pre-Covid level. JYL has
seen positive sales growth in the month of July with decent momentum in the HI
category as well. Restrictions and strict lockdown in some states are still impacting some operations. JYL has enhanced focus on LUPs (current contribution: 25-30%).
Nevertheless, the overall sentiment has improved and impacted segments are seeing
sequential improvement (mom). In terms of regions, rural is growing faster than urban.
The post-wash segment is seeing some weakness due to the lockdown.

 Keeping working capital in check. JYL has refrained from extending credit and
continues to operate on a cash basis. They have made some pre-payments to their
suppliers with whom they had longstanding relationships. This helped them to ramp up
production as the lockdown restrictions started to ease.

 Stepping up distribution. In the rural markets, JYL is adding more stock-stockists. They
are also strengthening their direct delivery through the retailer’s app given the disruption.
JYL has also enhanced focus on e-commerce platforms.

 Benign RM environment. The RM environment is favorable, which should help gross
margins. The company is also able to achieve certain operational efficiencies and ad-
spends can be calibrated depending on the situation. Management expects EBITDA
margins to be in the range of 15-16% for FY2021E.

 Other points.
(1) GT is largely back on track and is doing well. Large-format MT stores
and CSD outlets continue to be impacted.
(2) Promoter has released the pledge on
shares.
(3) JYL is working on a five-year vision which they plan to start implementing from end FY 2021.

5 Likes
88

Can you pls let us know which is this related party company relieving dividends? Thanks

1 Like
89

whether anyone still tracking Jyothy and can update their latest concall highlights

90

hit 52w low today! What did I missed. Everything seems ok to me. Any inputs?

91

If you read the commentary from the Management, they are facing huge pressure on their margins due to the increase in raw materials. In fact, their EBITDA has fallen from 87 Cr to 66 Cr (YOY) and their Gross Margin is down by 760 bps.

1 Like
92

Jyothy Labs Q2FY24 Concall Summary

1 Like
93

Interesting to see that M. R. Deepthi, the sister of MD M R Jyothy has resigned from the director board. I hope all is well with JLL !

94

Jyothy Labs Q3FY24 Concall Summary

A) Financial Highlights

Net sales up by 10.6% (lower than volume growth due to price correction) value growth. Volume growth is 11%
EBITDA margin stands at 17.5%
net profit up by y 34.9% for the quarter
Input prices stabilized, therefore sustained margin

B) Key categories performance
Fabric Care sales have increased by 11.9%, focus is also on growing the fast-growing liquid detergent category, which has also witnessed good results.
In Dish wash, sales have increased by 6.7%
Household Insecticide category, sales increased by 5.4%
Personal Care segment, sales have increased by 22.3%, Margo neem, rose, lemon, jasmine, got good response from consumers

C) Strategy (focusing more on volume growth)
1st - increase direct distribution
2nd - focusing on several digital advertising like out-of-home, van operations, newspaper ads for
each brand to reach out to the end consumer
3rd - New Products launches like liquid detergent in Henko and Ujala, new launches of Margo variant

D) Challenges:
The rural economy not picking up
Input price risk (if stable can this yr can earn 16-17% EBITDA margins)

E) Q&A

  1. Targeting in 4 yrs at CAGR of 19% but too rosy expect 5-6 yrs or top 12-15% CAGR.

  2. Focusing more on organic growth and less on M&A

  3. HPC (Health & Personal Care), open for shampoos or home and personal care

  4. Henko & Mr White focusing on geographical expansion & in-state growth.

  5. Once Rural economy picks in can expect more volume growth in Dish Wash Segment.
    Key raw materials used by Jyothy labs —> LABSA, Soda Ash, Palm Oil, etc

  6. 1.1 million outlets reach on a direct basis, by next FY to add 75 k to 100k more shops.

  7. Targeting 8-9% of sales as ads spent

  8. Once they add a retail shop it takes 12-24 months to show in the expected results (optimum sales target).

  9. To increase distribution they need to hire more which means more employee cost. (in next concall can ask for volume growth guidance for FY25)

  10. Ecom is 5-6% of topline, liquids do better in e-com, liquid detergent (online & offline) not a major part of wash portfolio, focusing more on the liquid detergent side.

  11. distribution reach still has more legs to grow under for Margo

  12. currently 23 plants, no plan for adding new as of now, means no major capex, expected maintenance capex of 40 Cr this yr

  13. In the near future can do price cut to tackle competitors thereby short term margin impact.

2 Likes
95

Jyothy Laboratories -

Q3 FY 24 concall highlights -

Sales - 678 vs 613 cr ( up 10 pc- all volume led despite overall sluggish demand trends for FMCG industry )
EBITDA - 119 vs 84 cr ( margins @ 18 vs 14 pc - due fall in RM prices )
PAT - 91 vs 67 cr ( up 35 pc )

Fabric Care sales - up 11 pc ( includes wash and post wash categories ). Liquid detergents growing at a fast clip - both Henko, Ujwala liquids

Dishwasher sales - up 7 pc

Household Insecticides sales - up 5 pc ( category facing headwinds for quite some time now ). Company focussed on selling Maxo - liquids. Onboarded - new brand ambassador - Kareena Kapoor for the brand

Personal care sales - up 22 pc !!! ( Margo - new variants did very well )

Have been investing aggressively in expanding distribution depth and alternate distribution channels

Company is aiming to do a topline of 5000 cr in 4-5 yrs

Not focussed on M&A activity at the moment - at the same time, not averse to it ( primary focus is on organic growth )

Henko - liquids growing at rates much higher than category growth

Have slowly started taking - Ujala, Moonlight, Mr White detergents to more and more states

Company was distributing to 11 lakh retail outlets in Mar 23. Aim to hit 12 lakh outlets by Mar 24. This should help volume growth going forward

E-Commerce sales as a percentage of company’s sales at 6 odd pc

Company has worked a lot on the Margo brand, have innovated and launched new variants. Still lot of scope for this brand to grow. Likely to launch new products under the Margo brand name

Have under-levered brands like - ‘Fa’ in their portfolio. May re-launch them at some point in time

Since Liquid detergents, personal care categories are doing well, the gross margins are improving

Disc: hold a tracking position, biased, not SEBI registered

96

Company has guided 5000 Cr revenue in next 4 to 5 years. Company has guided 16% to 17% EBIDTA.

Current revenue is at Rs 2700 cr it means it will doubele its revenue in next 4 years. Even if I take 13% NP of revenue total net profit for 2028 would be - Rs 650Cr
Considering 50 multiple for this company market cap would be Rs 32500 Cr.
It would double in next 4 to 5 year.

I get really scared when stock has to run only on EPS and not on multiple[PE] expansion. It’s really hard to make multibagger returns on only one engine.

[last 3 year]
Check ITC or Tata elxsi both Increased their revenue and then their Multiples expanded. Which resulted in multibagger returns.

97

Jyothy Labs -

Q4 results and concall highlights -

Q4 outcomes -

Revenues - 660 vs 617 cr, up 7 pc ( volume growth @ 7 pc )
Gross Margins @ 49.5 vs 45.7 pc
EBITDA - 108 vs 91 cr, up 19 pc ( margins @ 16 vs 15 pc )
PAT - 78 vs 59 cr, up 31 pc

Advertisement and Promotional spends @ 60 vs 46 cr ( at 9 pc of sales vs 7.5 pc of sales )

FY 24 outcomes -

Revenues - 2757 vs 2486 cr, up 11 pc ( volume growth @ 9 pc )
Gross Margins @ 49 vs 42 pc
EBITDA - 480 vs 316 cr, up 52 pc ( margins @ 17 vs 13 pc )
PAT - 369 vs 240 cr, up 54 pc

Advertisement and promotion spends @ 228 vs 174 cr, up 30 pc ( at 8.3 vs 7 pc of sales YoY )

Cash on balance sheet @ 618 cr

Breakup of revenues, full yr growth -

Fabric care ( main wash ) - 34 pc, grew by 12 pc
Fabric care ( post wash ) - 9 pc
Household Insecticides - 11 pc, sales were flat in FY 24
Personal Care - 9 pc, up 21 pc
Dishwashing - 33 pc, grew by 8 pc
Others - 4 pc

Brands … Mkt share
Exo … 14 pc
Pril … 13 pc
Ujala Detergent … 23 pc ( in Kerala )
Ujala Whitener … 84 pc
Maxo … 8 pc in Liquids, 23 pc in Coils

Other Promising brands - Henko, Ujala - Crisp and Shine, Margo, Mr White, More Light

Expanded direct distribution reach to 12 lakh outlets vs 11 lakh outlets in the previous year. Will continue to expand direct distribution by 8-10 pc / yr for the foreseeable future

New launches in FY 24 included - Henko Liquids, Ujala Liquid detergent, Margo Neem Naturals (launched 3 new Margo variants this yr)

Seeing gradual pickup in the rural markets - augurs well for next FY

Both - Ujala and Henko liquid detergents are doing well - in South of India Mkts and Modern trade

Company has lined up a few new product launches. Did not disclose their names / categories

Aiming for 16-17 pc EBITDA margins for full FY 25 after spending aggressively behind existing brands ( specially the liquid household insecticides ) and new launches

Company’s percentage of revenues from South of India @ 38-39 pc

Disc : Holding, Biased, Not SEBI registered

98

Q1FY25 Concall Summary

Business Updates

  • The volume growth was 10.8% yoy in Q1 and the gap with value growth is due to increase in grammage
  • Last year same quarter there was a one time gain of Rs 10 crores in profits due to sale sof land and hence yoy comparison is not comparable
  • There is intense competition in the detergents category but enhanced distribution has helped in growth in this category
  • The personal care portfolio grew by 10% yoy in Q1 and several ongoing initiatives using social media has helped the brand salience amongst youth

Participants

HDFC Securities

IIFL

Centrum Broking

Nuvama

Antique

Axis Capital

Nirmal Bang

ELARA Capital

Investec

ICICI Securities

QnA

  • A liquid detergent has been launched under “More Light” with a price point where it is affordable for a consumer who prefers value. The intent here is to increase penetration of liquid detergent amongst consumers
  • The cash is being kept for future opportunities at the moment
  • No particular state is doing better relatively and the growth is all across with modern trade and ecommerce doing very well
  • The market share gains continue and in dishwash with EXO the distribution expansion has helped grow market share from single digit to double digit in East India
  • The growth rate in liquids are from a smaller base and hence the numbers are higher and as the portfolio is expanding the focus will be to enable consumer to use a better quality product through liquids
  • The adoption of liquids is more in the southern part of the country
  • The current focus is volume growth and at these level of prices there is sufficient margin that is delivered so that the management can invest back in the business as well so there are no plans to increase prices
  • The company has gained 300 bps market share in the HI segment and that shows that efforts behind this segment is working
  • With an uptick in rural demand the concern of rural market not doing well have now abated and going forward more optimistic on rural demand getting better
  • Modern trade and ecommerce combined are 15% of the revenues and growing at a much faster pace than general. This was 10% three years ago
  • The margins in the HI segment should improve sequentially and efforts are behind that and that could improve the business margins on an overall basis as well
  • In terms of new launches whenever there is an opportunity to enter a category it will be done while the existing portfolio too continues to grow at a fast pace
4 Likes
99

Jyothy labs -

Q1 FY 25 results and concall highlights -

Sales - 742 vs 687 cr, up 8 pc - led by volume growth of 11 pc !!!

Gross margins @ 52 vs 48 pc

EBITDA - 133 vs 117 cr, up 13 pc ( margins @ 18 vs 17 pc )

PAT - 102 vs 96 cr, up 6 pc ( LY, there was an exceptional gain of 9 cr due sale of a one off property )

A&P spends @ 61 cr ( 8.3 pc of sales ) vs 50 cr ( 7.3 pc of sales )

Cash on books @ 650 cr

Company expects demand momentum to continue because of normal monsoons

Category wise growth rates -

Fabric Care - grew 8.8 pc YoY ( form 43 pc of company’s revenues )

Dish Wash - grew 7.1 pc YoY ( form 33 pc of company’s revenues )

Personal Care - grew 11 pc YoY ( form 13 pc of company’s sales )

Household Insecticides - grew 2 pc YoY ( form 7 pc of company’s sales ) - impacted by heat wave in Q1. Should do better in Q2

**Should be able to clock double digit sales growth with EBITDA > 16 pc for full FY **

Company has launched liquid detergents @ disruptive price point of Rs 70/lit in MT outlets- under the Moonlight brand. Have received encouraging response

Company has reduced its dividend payout in FY 24. Aim is to build onto their cash positions for inorganic opportunities

Exo - did very well in East India in Q1. Exo - is already very strong in the South Mkts

A lot of volume growth for the company is being driven by expansion in distribution

Most of the variants of Margo launched over the last couple of years continue to do well

Rural mkts were slow previously, but are picking up now for the last few months. With further pickup in rural demand, company should be a beneficiary

Capex for the year should be around 50-60 cr

Modern Trade + E-Comm now constitute 15 pc of company’s sales. This figure was around 10 pc, about 3 yrs back

In the Household insecticides space, company has gained mkt share by 300 BPS (YoY)- mainly on the back of Liquid Vaporisers - this is a big achievement - IMHO. Because of this, HI category’s EBIT losses have also come down. As the scale and mix of HI business improves, it should show up on company level margins in next 2-3 yrs

Similarly as the personal care business expands, it should favourably impact company level margins as its a high margin segment

Company sales mix continues to remain at 40:60 in terms of South:Rest of India ( this mix has been largely the same over last 3-4 yrs )

Company intends its personal care portfolio to contribute to a minimum of 15 pc of sales vs 13 pc currently. Company is open to inorganic route to achieve that

Company is working on organic new product development as well. Will announce it when they r ready to launch

Disc: hold a small position, not SEBI registered, not a buy/sell recommendation, biased

2 Likes
100

Jyothy Labs -

Q2 FY 25 results and concall highlights -

Revenues - 734 vs 732 cr
Gross Margins @ 50.2 vs 49.2 pc
EBITDA - 138 vs 135 cr ( margins @ 19 vs 18 pc )
PAT - 105 vs 104 cr

Q2 volume growth @ 3 pc

A&P spends @ 61 vs 57 cr YoY

Cash on books @ 658 cr

Category wise revenue contribution -

Fabric Wash - 33 pc ( Henko + Mr White + Morelight + Ujala Detergent )
Post Wash - 10 pc (Ujala Whitener + Ujala crisp & Shine)
HI - 6 pc ( Maxo )
Personal Care - 12 pc ( Margo + Fa )
Dish Wash - 35 pc ( Pril + Exo )

Ujala detergent achieved a mkt share of 24 pc in Kerala in Q2

Rolled out Mr White liquid detergent in select markets in Oct 24

Pril liquid’s mkt share @ 14 pc

Maxo liquid vaporiser grew in double digits vs mkt growth of 2 pc. Maxo coils saw a volume decline due to consumer shift towards incense sticks

40 pc of company sales come from South India. July was a weak month for the company due to floods in south India. In Sep, they saw double digit growth

Company expects mid to high single digit growth in Q3 ( going by trends in Oct )

Ex-July ( because of floods ), company’s volume growth has been mid - high single digits

Company has lined up a new product launches in CY 26 ( its going to be a new product category )

Modern Trade and E-Commerce have been growing at double digits. General trade has been under pressure

Company still has a descent headroom ( not as much as before ) to keep expanding its distribution reach more foreseeable future. However, they ll have to be more measured while embarking on further distribution expansion journey

Ujala Detergent is one brand which is present only in Kerala, TN, WB. Company intends to take it pan India

Will be taking a price hike in their Soaps portfolio in late Q3

Guiding for a 16-17 pc EBITDA margin for full FY 25 ( likely to spend more on demand generation, A&P which may result in moderation in margins )

Disc: hold a tracking position, biased, not SEBI registered, not a buy / sell recommendation