January 18, 2011
ICICIdirect.com | Equity Research
Initiating Coverage
ICICI Securities Limited
Expanding on existing brand equity… Leveraging on its strong brand equity of ‘Ujala’, Jyothy Laboratories (JLL) has diversified from a single brand and single product into a multi-product company. Remaining a niche player in segments (liquid whitener, fabric enhancer, mosquito repellent coils and dishwashing bars), JLL’s brands (Ujala, Maxo and Exo) have grown at a CAGR of 25.8% from FY08-10. With the extension into detergents, aerosols and fabric wash we believe the company would continue to grow at a CAGR of 19.6% from FY11-13E. We are initiating coverage on the stock with an ADD rating.
Extension of brands to drive revenue growth Capitalising on its brand equity in Ujala (72% market share) and Maxo (21% market share), JLL has expanded its portfolio to washing powders, fabric enhancer, aerosols and outdoor mosquito repellent products. The increasing demand for these products and the company’s aggressive marketing initiatives would be key drivers for the brand’s performance. The venture into the niche fabric wash segment through JFSL, that has relatively less competition and attractive opportunity, would further help JLL to witness the expected CAGR (FY11-13E) of 19.6%.
Margin concerns to prevail Rising material costs (especially crude that has touched $92/bbl) and increasing advertisement expenses (from 8% in FY10 to ~9.5% in FY11E) for the promotion of its new products and launching products nationally would continue to keep margins lower at ~15%. Moreover, with intensifying competition (especially in detergents and coils that are highly price sensitive) pricing would be a challenge to maintain sales (volume) growth. Higher operating margins (~36% as in FY10) in JFSL could also get trimmed with increasing competition due to the attractive valuation.
Valuation At the CMP of |276, the stock is trading at 25.1x its FY11E EPS of |11 and 21x its FY12E EPS of | 13. With the company’s expansion into detergents, fabric wash, aerosols & outdoor repellent products, we have valued the stock at 22x its FY12E EPS, arriving at a fair value of | 292. Also, on comparison with the FMCG Index, JLL is trading at 21.4x its FY12E EPS while the FMCG index is trading at 27x its one year forward earnings (estimated). With JLL being a relatively smaller player and in its nascent stage, we believe the discount of ~20% to the index is justified. We are initiating coverage on the stock with an ADD rating. Exhibit 1: Financial Performance
FY09* FY10 FY11E FY12E FY13ENet Sales (| Crore) 363.5 598.1 719.9 870.1 1,029.2 EBITDA (| Crore) 48.8 91.8 106.4 130.6 158.4 PAT (| Crore) 38.4 75.3 88.9 106.2 127.3 EPS (|) 5.3 10.4 11.0 13.2 15.8 Price / Book (x) 5.8 5.2 3.1 2.9 2.7 EV/EBITDA (x) 43.7 23.2 19.4 15.5 12.6 RoCE (%) 11.9 20.0 12.8 15.0 16.9 RoE (%) 11.1 19.4 12.3 13.8 15.2
*2009 figures are for 9 months from June, 2008 to March, 2009 Source: Company, ICICIdirect.com Research
Jyothy Laboratories (JYOLAB) | 276
Rating matrix Rating : Add
Target : | 292
Target Period : 12-15 months
Potential Upside : 6%
YoY Growth (%) (YoY Growth) FY10 FY11E FY12E FY13ENet Sales 64.5 20.4 20.9 18.3 EBITDA 88.3 15.9 22.8 21.3 Net Profit 88.3 15.9 22.8 21.3 EPS (|) 96.2 18.1 19.4 19.9
*2010 growth percentage is calculated over 9 months 2009 data; hence not comparable
Current & Target Multiples FY10 FY11E FY12E FY13E
P/E 26.7 25.1 21.0 17.5 Target P/E 28.2 26.5 22.2 18.5 EV / EBITDA 23.2 19.4 15.5 12.6 Target EV / EBITDA 24.5 20.5 16.5 13.3 Price to Book Value 5.2 3.1 2.9 2.7
Stock data Bloomberg/Reuters Code JYL IB. / JYOI.NSSensex 18874.1
Average volumes 46009.0Market Cap (| crore) 2233.5
52 week H/L 318 / 156
Equity Capital (| crore) 8.1Promoter's Stake (%) 70FII Holding (%) 11.2DII Holding (%) 18.0 Price movement
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Comparable Return Matrix (%) Return % 1M 3M 6M 12MJyothy Laboratories Ltd 3.0 (2.3) 2.1 64.3
Emami (1.5) (15.6) (3.1) 53.7
Godrej Consumer 5.0 (0.1) 14.5 49.1 HUL 1.4 1.1 17.4 18.2
Analyst’s name
Sanjay Manyal [email protected]
Parineeta Poddar [email protected]
ICICIdirect.com | Equity Research Page 2
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Company Background Jyothy Laboratories Ltd (JLL) is the market leader in the niche fabric whitener category with its flagship brand ‘Ujala’ (market share by value of 72% in FY10). It is also present in the household insecticide and dishwashing segments through two other brands Maxo (market share by value of 21.2% in FY10) and Exo (market share by value of 23% in FY10), respectively. JLL commenced its operations in 1983 led by MP Ramachandran. Initially, it was a proprietary concern with a team of six sales people who sold Ujala going house to house in Trichur and Malappuram districts in Kerala. However, over the years, the company has successfully grown by expanding its reach throughout the country as well as entering new segments.
• In 2000, Jyothy entered the household care segment and launched its mosquito repellent brand ‘Maxo’ and dishwashing brand ‘Exo’ in West Bengal and Kerala, respectively
• In 2001, it introduced its brand Maya (incense sticks) in selected states in the country
• In 2002, JLL acquired Sri Sai Homecare Products Pvt Ltd, a mosquito repellent coil manufacturing facility in Hyderabad and during the same year launched its ayurvedic soap brand Jeeva
• In 2005, the company introduced Exo Liquid and Ujala Stiff & Shine (fabric enhancer) in South India. Further, in 2008, it launched these products across the nation
• In 2009, JLL forayed into the laundry service segment and set up its new venture Jyothy Fabricare Services Ltd (JFSL) with the aim of providing “world class laundry at affordable prices at one’s doorstep” both to retail and institutional categories. Currently, JFSL’s operations are restricted only to Bangalore.
Over the years, JLL has grown at a CAGR of 18.6% from 2006-10 with the sales in FY10 being | 598.1 crore. Ujala is the leading brand in the company’s portfolio and contributes 45.6%* (| 264.2 crore in FY10) to the topline, followed by Maxo contributing 30.8%* (| 178.8 crore in FY10), Exo 16.4%* (| 95.3 crore in FY10), JFSL ~0.8%* (| 4.7 crore in FY10) and around 6.3%* (| 36.6 crore in FY10) followed by others (Maya and Jeeva).
Shareholding Pattern (FY10)
Shareholder % holding
Promoters 70.1
Institutional Invetsors 21.6
Other Investors 8.3
Promoter & Institutional Holding Trend
70.1 70.1 70.1 70.1 63.1
29.222.121.621.422.4
0
20
40
60
80
Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
Promoters Institutional Invetsors
*% is on standalone sales
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JLL’s brands and their contribution in revenues (standalone figures for FY10)
JYOTHY LABORATORIES (JLL)
|579.6 crores*
Ujala Supreme (Fabric Whitener) |183.2 cr (69.3%
of Ujala sales)
UJALA | 264.2 cr
(45.6% of JLL sales)
MAXO | 178.8 cr
(30.8% of JLL sales)
EXO | 95.3 cr
(16.4% of JLL sales)
OTHERS | 41.3 cr
(7.1% of JLL sales)
Ujala Detergents | 64.7 cr
(24.5% of Ujala sales)
Ujala Stiff & Shine (Fabric Enhancer)
| 16.3 cr (6.2% of Ujala
sales)
Maxo coils |179 cr
Exo Dishwash bars and liquid
|61.9 cr (65% of Exo sales)
Exo Safai Units (scrubbers)
|33.4 cr (35% of Exo sales)
Maya (incense sticks) & Jeeva
(ayurvedic soaps) |36.6 cr
(6.3% of JLL sales)
JFSL | 4.7 cr
(0.8% of JLL sales)
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Investment Rationale Brand extensions and geographical expansion to drive revenue growth
Expansion of Ujala’s portfolio to drive brand’s growth
JLL’s flagship brand Ujala comprises whiteners, detergents and fabric enhancer in the product portfolio and constitutes ~44% of JLL’s total sales (FY10). The brand has grown at a CAGR of 17% from 2007-10. Going ahead, we expect the growth (CAGR) to be ~19% in 2010-13E. The growth would be led by detergent (~34% CAGR FY10-13E) and fabric enhancer (~12% CAGR FY10-13E) sales with the growth in liquid whiteners remaining muted. Exhibit 2: Ujala's sales in | crore from 2007 to 2013E
163.2201.2 220.0
264.2
334.3
388.8
448.3
0.0
100.0
200.0
300.0
400.0
500.0
2007 2008 2009* 2010 2011E 2012E 2013E
| Cr
Source: Company, ICICIdirect.com Research *2009 includes sales from June, 2008 to March, 2009
Exhibit 3: Ujala’s contribution in overall sales
45 53 44 44 46 45 44
55 47 56 56 54 55 56
0
20
40
60
80
100
120
2007 2008 2009* 2010 2011E 2012E 2013E
% o
f tot
al s
ales
Ujala Others
Source: Company, ICICIdirect.com, Research *2009 includes sales from June, 2008 to March,2009
Exhibit 4: Brand composition of Ujala
84 79 69 69 64 60
8 15 24 26 31 35
555667
0
20
40
60
80
100
120
2008 2009* 2010 2011E 2012E 2013E
% o
f Uja
la S
ales
Ujala Supreme Ujala Detergents Stiff and Shine
Source: Company, ICICIdirect.com, Research *2009 includes sales from June,2008 to March,2009
Ujala Supreme
Ujala Supreme, the fabric whitener, is the main offering of the company contributing ~30% (| 183.2 crore) to JLL’s topline and ~70% of Ujala’s sales. It has an overall market share of 72% by value (FY10) and the entire market in Kerala (the company’s largest market for all its products). The closest competitor for this product is Robin Blue having a mere 4% share by value (FY10). Ujala Supreme has grown at a CAGR of ~4% from 2008-
Growth in sales from FY11-13E will be led by detergents
and fabric enhancer sales (Stiff and Shine) with the fabric whitener’s growth remaining subdued
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10. We expect it to grow at ~14% (CAGR) from 2010-13E. The higher estimated growth is on the back of ~15% price increase taken in FY11E though we believe volume growth (CAGR FY10-13E) would remain at~6%.
Exhibit 5: Market share of Ujala with its closest competitor
65.1 66.7 68.5 68.974.3 74.8 72
4.2 4.3 4 4.2 3.9 3.5 4.1
01020304050607080
2004 2005 2006 2007 2008 2009 2010
Mar
ket S
hare
(in
%)
Ujala Fabric Whitener Robin Blue
Source: Company, ICICIdirect.com, Research
Exhibit 6: Sales of Ujala Supreme (| crore)
169.7125.9
183.2
230.3250.3
269.8
0
100
200
300
2008 2009* 2010 2011E 2012E 2013E
Sale
s in
| C
r
CAGR 14%
~26% increase FY11E sales due to 15% increase in prices and 7.5% increase in volumes
Source: Company, ICICIdirect.com, Research *2009 includes sales from June, 2008 to March,2009
Ujala Detergents
Leveraging on the brand equity of Ujala Supreme, JLL entered the detergent segment (market size of | 12,000 crore in FY10) and launched Ujala washing powder in Kerala in 2001. It has categorised the detergents into two variants, Ujala washing powder (80% of detergent sales priced at | 54/kg) and Technobright (20% of detergent sales priced at | 90/kg), targeting the economy and premium categories, respectively. Having test marketed the product in Kerala (garnered a market share of 17% by volume in FY10), the company launched the product pan-India in August, 2010. Exhibit 7: Growth in sales & contribution of Ujala Detergents
118.885.964.723.5 156.016.8
8.4%
14.8%
24.5% 25.7%
30.6%34.8%
10.8%15.2%13.7%11.9%
6.5%
4.4%
0
40
80
120
160
200
2008 2009* 2010 2011E 2012E 2013E
0%
10%
20%
30%
40%
Ujala Detergents (| Cr) (LHS) % of Ujala Sales % of Total Sales
National Roll out led to ~175% growth
34% CAGR
Source: Company, ICICIdirect.com Research *2009 includes sales from June, 2008 to March, 2009
We expect detergents to grow at CAGR of ~34% (volume growth of 35%) from FY10-13E backed by the company’s strategy of avoiding the overlapping segments of market leaders (HUL and P&G). Moreover, with the marketing initiatives taken by the company, signing Sachin Tendulkar (high brand equity in rural areas) as the product’s brand ambassador and increasing its advertisement expenses by ~132% in H1FY11 for Ujala (especially detergents) alone to |11.6 crore to increase its penetration and
With the aggressive marketing initiatives and inorganic
growth prospects for detergents, we expect the
contribution to increase from ~11% in FY10 to 15% by FY13E
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fight competition from the smaller players (Ghari and Nirma), we believe the expected growth of ~34% would be achieved.
The company is also looking for inorganic expansion (targeting regional players) in the detergent segment (not accounted for in the estimated growth) and has raised | 228 crore via QIP for the same. It is in advanced talks with Safechem Industries (West Bengal based player) to buy its detergent brand Safed.
Ujala Stiff & Shine
The smallest contributor (6% by value in FY10) to Ujala’s sales, Stiff & Shine (fabric enhancer nationally launched in Q3FY08) has grown at a CAGR of 6.8% from 2008-10. Going forward, we expect it to witness a CAGR of ~12% from FY10 to FY13E. With the increasing demand for products that safeguard the quality of clothes, appropriate distribution and marketing of the product would help JLL to achieve the targeted growth and create a market for the product (it being a niche and new concept with no competition).
Thus, with ~15% growth among all products under the brand, led both by volume and value we expect Ujala to continue to be the largest contributor to topline (~44% in FY13E), going ahead.
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Growth in Maxo sales to be driven by introduction of aerosols, DEPA products
Maxo, the second largest brand by sales (| 178.8 crore in FY10 and contributing ~30% to topline) for JLL grew at a CAGR of ~26% from FY08 to FY10 garnering an overall market share 12% by value in the mosquito repellent category (market size of ~| 2000 crore). However, it is the market leader in rural India with 32.4% share by value (FY10). With the company introducing Diethyl Phenyl Acetamide (DEPA) products and aerosols in its product portfolio from FY11, we expect overall growth for the segment to be maintained at around 22% (CAGR) from FY10-13E, thereby reaching | 324.6 crore by FY13E from | 178.8 crore in FY10.
Exhibit 8: Market share of JLL in mosquito repellent category (FY10)
Market Size is |2000 cr
Godrej33%
Reckitt22%
Jyothy12%
Johnson18%
Others15%
Source: Company, ICICIdirect.com, Research
Exhibit 9: Maxo’s sales from 2007-2013E
141.5110.9
138.0
178.8217.5
265.6
0
100
200
300
2007 2008 2009 2010 2011E 2012E
Sale
s (|
Cr)
Source: Company, ICICIdirect.com, Research
In March, 2010 Defence Research & Development Organization (DRDO) assigned JLL the exclusive rights to develop and sell its DEPA (multi insect repellent technology) products in various formulations (through its established brand Maxo) in Indian and International markets. The technology aims to provide repellent solution for outdoor use as all products in this category have been predominantly for indoor use (Odomos). In exchange for the technology, JLL is required to pay a royalty fee of 2% on domestic sales, 3% on sales in military canteens and 4% for exports.
With the company’s usual practice of test marketing its products in Kerala, DEPA products were launched in Kerala on July 16, 2010 and are expected to be introduced nationally in January, 2011. JLL being the sole owner of the technology (with relatively no player in the outdoor mosquito repellent products), we expect the sale from these products to witness a CAGR of ~100% and reach | 80 crore by FY13E from | 20 crore in FY11E (including the sales to GoI for CWG and ~| 1.5 crore per month sales from Kerala). With the national launch of the product, we expect sales of around | 1.5 crore per month from all-India for January-March, 2011.
Maxo’s sales would be led by higher growth in aerosols than in coils with the increasing demand for the former.
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Exhibit 10: Maxo's product portfolio and expected sales growth
142 111 115179 178 180 183
20 408045
61
20
21.7%
22.1% 22.2%
0
100
200
300
400
2007 2008 2009* 2010 2011E 2012E 2013E
Coils
Vol
(in
cr u
nits
)
20%
21%
21%
22%
22%
23%
Sale
s Gr
owth
(%)
Sales (from coils in | cr) DEPA Products (in | cr)
Sales (from aerosols in | cr) Sales Growth
25% share from aerosols to be achieved only by FY13E
100% YoY growth till FY13E to be led by national roll out
Source: Company, ICICIdirect.com Research
Aerosols and sprays (market size as of FY10 was | 260 crore) are the new products in Maxo’s portfolio. The margins from aerosols are higher than from coils at ~20% and ~6%, respectively. Therefore, with the increased marketing efforts of the company and higher opportunity backed by relatively less competition in the category, we believe that contribution of aerosols in Maxo’s portfolio would increase to ~25% by FY13E from 10% in FY10 clocking a CAGR of 50% from FY10-13E. With the huge opportunity in the aerosols market, competition would intensify in the coming years especially from the market leader (Godrej with 33.1% share as of FY10). However, we believe JLL’s strong brand equity and rural presence would help it to maintain its sales growth.
In spite of tough competition in the coils market from industry leaders, Good Knight (Godrej’s brand having 21.4% share as in FY10) and Mortein (Reckitt Benckiser’s brand having 32% share in coils segment as on FY10), Jyothy maintained its market share (by value) over the years (at 21.2% in FY10) with others witnessing a loss in share. The large players are facing tough competition from the smaller/unorganised players who are increasingly gaining pace through their low cost strategy. Thus, with increasing competition in the coils segment and consumers (largely rural) shifting their usage to electricals, aerosols and creams (JLL’s presence in this category is relatively very low), we believe JLL’s move to tap the opportunity in these faster growing categories would help it in maintaining its market share.
Exhibit 11: Maxo’s market share from FY08-FY10
20.9%
33.6%
21.3%20.3%
36%
22.8%21.4%21.2%
32%
10%
20%
30%
40%
Maxo Mortein Good Knight
2008 2009 2010
Source: Company, ICICIdirect.com, Research
Exhibit 12: Volume & value growth in coils segment from FY08-FY10
513
885
539
994
533
1081
400
550
700
850
1000
Volume (Cr units) Value (| Cr)
FY08 FY09 FY10
Source: Company, ICICIdirect.com, Research
Break-up of mosquito repellent segment (FY10)
Coils53%
Electricals30%
Aerosols13%
Others4%
Source: Company, ICICIdirect.com Research
Intensifying competition, stagnant demand and lower margins in coils are the key drivers for JLL in expanding Maxo’s offerings
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Exo sales to be driven by increase in rural contribution
Exo (dish wash bars and scrubbers) constitutes the dishwashing category of JLL and contributes 16% (| 95.3 crore) of total sales (FY10). The brand has witnessed robust grown of ~53% (CAGR) from 2007-10. Going ahead, we expect the growth (CAGR) to be ~20% from FY10-13E. With relatively low penetration for utensil cleaners in rural India (~17%) compared to urban India (~60%), we believe the growth would largely be driven by contribution form rural consumers. Also, with Exo’s national roll out in January, 2010, the company has been able to increase its market share to 23% (FY10) from 17.6% (FY08) with the market leader Vim (HUL) losing market share to 61.6% (FY10) from 69.5% (FY08). However, with Vim sales still being almost 3x that of Exo, JLL’s marketing strategy for the brand would play a crucial role.
Exhibit 13: Exo’s market share from FY08-10
69.5%
17.6%
66.9%
20.7%
61.6%
23.0%
0%
20%
40%
60%
80%
Vim Exo
2008 2009 2010
Source: Company, ICICIdirect.com, Research
Exhibit 14: Exo’s sales
36.452.5
95.3
117.7142.0
162.6
020406080
100120140160180
2008 2009* 2010 2011E 2012E 2013E
Sale
s (|
cr)
Dishwash bars Scrubbers (Exo Safai)
CAGR 22%
Source: Company, ICICIdirect.com, Research
Going ahead, with the increasing penetration of dishwashing products in the country (at around 35% in FY10) and the strengthening of the company’s distribution network (from 3.5 lakh retail outlets in 2008 to ~10 lakh outlets in 2010), we expect the sales to increase to | 163 crore by FY13E from | 95 crore in FY10 and the overall market share to increase to ~35% contributed largely by the rural economy.
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Diversification in Maxo’s portfolio, rationalisation of costs in Ujala to improve margins
JLL’s introduction of Maxo aerosols in the brand’s offerings would expand its margins from the brand as margins from aerosols are ~20% compared to coils that have ~6% margin (in FY10).
Maxo contributes ~9% (FY10) to JLL’s margins (| 91.8 crore in FY10) with margins being ~6% (FY10). With the extensive marketing undertaken by the company (increase in advertisement expenditure for Maxo in H1FY11 by 132% from | 2.01 crore to | 4.67 crore), we expect the contribution of aerosols to increase from around 10% in FY11E to ~25% by FY13E. The increasing contribution would, hence, improve margins from Maxo by 140 bps to ~7.5% in FY11E and by 350 bps to ~9.5% by FY13E.
Exhibit 15: Margin expansion in Maxo with increase in aerosols sales
6.0%
7.4%
8.8%9.5%
0
50
100
150
200
250
2010 2011E 2012E 2013E
Max
o Sa
les
(| C
r)
0%
2%
4%
6%
8%
10%
Mar
gins
(%)
Coils (| Cr) Aerosols (| Cr) Total margins from Maxo
Source: Company, ICICIdirect.com Research * For calculation of margins DEPA products sales has not been included in Maxo sales as the margins in them are not known.
JLL modified the packaging of Ujala Supreme (75 ml bottles – largest selling SKU) by reducing the grammage of its bottles (75 ml) from 18 gm to 8 gm, subsequently leading to cost savings of | 0.5 per bottle and increasing margins by 3% from it. The driver for this change was the rising HDPE (crude derivative) prices, the key packaging product used by JLL. Exhibit 16: Cost reduction initiatives in Ujala
Wt of 75ml bottle (earlier) in gm 18
Wt of 75ml bottle (now) in gm 8
HDPE price/tonne* 55350
No. of bottles sold per day (mn) 1
Total cost at 18gm (in | Cr) 0.1
Total cost at 8gm (in | Cr) 0.04
Savings (in | Cr.) 0.06
% of savings 56% Source: Company, ICICIdirect.com Research
Brand Sales (FY10) EBITDA (%) EBITDA (| Cr)
Ujala 264.2 30% 79.2
Maxo 178.8 6% 10.7
Exo 95.3 10% 9.5
EBITDA from JLL’s brands
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Entry into niche fabric wash category through JFSL
JLL ventured into the untapped laundry segment (estimated market size is | 2000 crore by KPMG and INSEAD Analysis in their report, 2007-12: Outlook for Dry Cleaning and Laundry Services) in November, 2009 in Bangalore. By the end of FY10, the company has processed 28,000 pieces per day generating ~| 5 crore by the end of FY10. Led by increasing household income, growing working population, aggressive expansion plans of the company and the competitive advantage of being the sole player in the segment, we believe the sales would grow at a CAGR of ~140% from FY10-13E clocking sales of | 68 crore by FY13E.
JFSL has been formed with JLL holding a 75% stake and 25% being held by Ullas Kamath (managing director of JLL). The cost of the venture was ~| 35 crore. JFSL owns a laundry facility in Bengaluru with a total capacity of washing ~40,000 pieces a day. JFSL acquired a Bangalore based laundry services chain ‘Snoways’ with eight outlets in November, 2009 and has increased it to 30 stores. The company also launched the ‘Fabric Spa’ JFSL’s flagship brand on November 15, 2009 with two quick service stations and 10 collection and delivery centres.
JFSL caters to both the retail (10% by volume and 20% by value for FY11E) and institutional categories (90% by volume and 80% by value as on FY11E). The margins from the retail category (~60%) are higher than the institutional category (~30%).
With JFSL being assigned the official launderers for CWG, 2010 and already (by the end of Q2FY11) processing ~38,000 pieces (~3500 in retail and ~34,500 in institutional), we expect the company’s revenues from JFSL for FY11E to be ~| 17 crore. Going ahead, JFSL plans to extend its operations to Chennai, Hyderabad and Pune in Phase 1 by FY12 and to Mumbai, Delhi and Kolkata between FY12-15. We estimate the sales from JFSL will witness a CAGR of ~100% from FY11E-13E taking into account the expansion plans (of phase 1 only and add to revenues from FY12E) too. We believe that the total cost of expansion (Phase 1 &2) for JFSL would be ~|200 crore based on the same scale of cost that was expended for setting up the Bangalore facility; which could be could be funded through selling off JFSL stake (of JLL) to a private equity player or through internal cash accruals. Exhibit 17: JFSL Estimates (FY11-13E)
2011E 2012E 2013E
Clothes washed per day
Institutional 32500 58500 93600
Retail 4000 7200 11880
Price
Institutional (per kg) 27 27 25
Retail (per piece/% of total retail sales)Economy(| 40/pc) 45% 30% 30%
Busy Easy (|50/pc) 50% 50% 50%
Premium (|90/pc) 5% 20% 20%
Days of operation
Institutional 250 270 270
Retail 180 270 270
Total Revenues (| cr)
Institutional 13.2 34.1 50.5
Retail 3.4 10.7 17.7
Source: Company, ICICIdirect.com Research For institutional per piece weight is estimated to be 600gm (FY11E &FY12E) and 800 gm for FY13E
Setup Cost break uo for JFSL in Bengaluru Cost of the Project | Crore
Land 2.5
Building (~70,000 sq. ft of built up area) 8
Machinery 12
Acquisition of Snoways 1.5
Retail Outlet Deposit/Interiors 3
IT Hardware & Infrastructure 3
Vehicle/Logistics 2
Pre operative expenses 2
Contingencies 1
Total 35
JFSL (|17 cr sales in FY11E
Retail (20% of sales by
value in FY11E)
Institutional (80% of sales by value in FY11E)
Busy Easy & Snoways Priced at Rs.50/pc
and Rs.40/pc
Premium (Fabric Spa)
priced at Rs.90/pc
JFSL Corporate
Prices range from Rs.27
to Rs.40 per kg
ICICIdirect.com | Equity Research Page 12
ICICI Securities Limited
Extension of flagship brands through acquisitions JLL has followed the inorganic route of expansion since its inception with all acquisitions being funded by the company’s internal accruals. Recently, the company ventured into the fabricare services business in 2009 by acquiring ‘Snoways’ chain of laundry in Bangalore operating with eight stores, which it increased to 30. The company plans to continue its presence in the fabricare space and recently raised | 228 crore via QIP (issued 80, 67,370 shares of face value | 1 shares issued at a premium of | 281.6 per share) for the same purpose. Having raised the money, the company has plans to acquire a regional detergent brand ‘Safed’ in eastern India (West Bengal). Exhibit 18: Acquisitions over the years Year Acquired Segment
2002 Sri Sai Homecare Products Pvt. Ltd. Mosquito Repellant Coil
2007 Ruby Liquid blue Fabric Whitener
2007 More Light Fabric Whitener
2007 Bangalore Detergents & Plastics Company Fabricare
2009 Snoways Laundry Fabricare
2010 Safed Detergents Fabricare
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research Page 13
ICICI Securities Limited
Risks and concerns High dependence on flagship brand Ujala We believe that the entry of detergents with better formulations would gradually wipe off the market for liquid whiteners and the price war concerns in the detergent segment would increase pressure on the company to operate on lower margins and face tough challenges in maintaining its market share. With JLL’s 31% sales coming from Ujala Supreme (fabric whitener) and 11% sales from Ujala detergents, the slightest deviation in their sales would adversely impact JLL’s topline. With Ujala being the highest contributor to EBITDA (~90% in FY10), an impact on the sales from it would also hit the margins.
JFSL’s performance to temper down JFSL’s expansion plans is estimated to require ~| 200 crore (management estimates only | 150 crore) considering the investment of | 35 crore in setting up a single facility in Bengaluru in November, 2009. With operations in Bengaluru alone not having achieved breakeven even after two years of operation, the aggressive expansion plans look stretched. Moreover, with the intentions of the company to increase JFSL’s contribution to JLL’s topline to 25% by FY13E, revenue per city would have to be ~| 80 crore (considering the expansion plans of Phase 1 will be completed by FY13E). This seems quite stretched based on the performance in Bengaluru till date. The higher margins of ~30% from institutional segment and ~60% from retail (blended margin of ~36%) would not sustain in the long run with competition from unorganised players pouring in. With an increase in the cost of processing passing on the costs to consumers could impact the volume growth.
Rising raw material and advertisement costs to pressurise margins Rising crude prices to $92/bbl in January, 2011 from ~85/bbl in January, 2010 leading to increase in prices of HDPE (crude based derivative) and plastic (~20% of JLL’s raw material costs for manufactured goods as of FY10) would impact JLL’s margins by ~200 bps (FY12E). Thus, any further increase in crude from would further lead to margin contraction. We believe that with the introduction of detergents, aerosols and targeted growth in Exo & JFSL would keep advertisement expenses higher at ~9.5% of net sales (FY11E) at | 68.3 crore against 8.1% in FY10 at | 48.5 crore. JLL’s advertisement costs were already higher by ~98% in H1FY11 at | 20.8 crore against | 10.5 crore in H1FY10. Exhibit 19: Raw materials, advertisement expenses & EBITDA margins
0
75
150
225
300
2007 2008 2009 2010 2011E 2012E 2013E
Advertisement Expenses RM Exp EBITDA Margins (%)
Source: Company, ICICIdirect.com Research Costs are indexed to the base of 2007
JFSL Estimates
2010 2011E 2012E 2013E
Institutional (pieces/day) 25000 32500 58500 93600
Retail (pieces/day) 3000 4000 7200 11880
Revenue (| Cr) 4.7 16.6 44.8 68.2
Contribution to Revenue 0.8% 2.3% 5.2% 6.6% *the estimates include the expansion plans of Phase 1 to come by FY13E only.
ICICIdirect.com | Equity Research Page 14
ICICI Securities Limited
Financials Sales to grow at 19.6% CAGR from FY11-13E JLL’s sales grew at a CAGR of 18% from FY07-10 to | 598.1 crore (FY10). We expect it to grow at 19.6% from FY11E-13E to |1029.2 crore (FY13E). Ujala - Higher sales growth would largely be accounted by the increase in Ujala sales at ~16% CAGR from FY11E-13E to | 448 crore (FY13E) against 15% CAGR from FY08-10 to | 264 crore in FY10. We expect Ujala detergents & S&S sales to witness ~35% and ~12% CAGR from FY11-13E. Maxo - CAGR growth in Maxo sales is expected to be ~22% (FY11-13E) against ~8% CAGR from FY07-10 and reach | 325 crore (FY13E). The growth (CAGR) in aerosols and DEPA products is expected to be robust at ~75% (| 61 crore by FY13E from | 20 crore in FY11E) and 100% (| 80 crore in FY13E from | 20 crore in FY11E). Exo - Exo grew at ~53% CAGR from FY07-10 (| 26 crore to | 95 crore) witnessing robust growth (~71%) in 2009 when it was launched nationally. Hence, we expect the growth (CAGR from FY11-13E) to moderate to 17.5% (due to the high base effect) but remain higher than the category growth rate of ~13% (FY10). Also, increasing sales of JFSL at ~100% CAGR (FY11-13E) would marginally contribute to the growth. Exhibit 20: Sales growth from FY08-13E
380 465 598 719 870 1029
-200
0
200
400
600
800
1000
1200
2008 2009 2010 2011E 2012E 2013E
Sale
s (|
Cr)
-25.0
0.0
25.0
50.0
75.0
Grow
th (%
)
Net Sales Ujala Maxo Exo
Source: Company, ICICIdirect.com Research
Margins to remain under pressure We expect margins to remain under pressure from FY11-13E at ~15% (declining by 50 bps in FY11E to 14.8% from 15.3% in FY10). Rise in crude prices to ~$92/bbl would increase the cost of HDPE (crude derivative) and plastic (both constituting ~40% of raw material cost for manufactured goods). Moreover, the extension of the brand’s portfolio and launching products nationally would increase the advertisement cost (FY11E saw 9.5% of sales compared to 8.1% in FY10) pressurising margins further.
With national launches for products (Exo in FY09 and detergents
in August, 2010), we believe the sales would continue to be led by growth from all three brands
ICICIdirect.com | Equity Research Page 15
ICICI Securities Limited
Exhibit 21: Impact on margins from RM (% of sales) & ad (%of sales) expenses
15.415.014.815.3
13.4
16.114.9
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2007 2008 2009 2010 2011E 2012E 2013E
Ad &
EBI
TDA
mar
gins
48.0
50.0
52.0
54.0
RM E
xp
Ad exp (LHS) EBITDA Margins (LHS) RM Exp (RHS)
Rise in RM expenses & higher ad expenses in FY11E impacting margins in FY11E. In FY12 ad exp continue to remain higher; however decline in RM helps margins to improve
Source: Company, ICICIdirect.com Research
Profitability growth to moderate We expect bottomline growth from FY11-13E to grow at a CAGR of 19.7% to | 127 crore against 23% CAGR from FY08-10. The bottomline growth is expected to slow down on the back of increased interest cost for JFSL (| 13 crore loan at ~11% per annum rate of interest raised in FY10).
Return ratios to remain low led by expansion plans JLL’s return ratios would decline considerably from 19.4% in FY10 to 12.3% in FY11E. However, it would improve gradually to 15.2% by FY13E. The drastic fall in the ratio was led by the company’s expansion plans (in detergent and fabric care space) for which it raised | 228 crore in FY11 via QIP, thereby increasing the net worth. However, going ahead, incremental earnings from the expansion (detergents, aerosols and JFSL) would improve the returns to 15.2% by FY13E. Exhibit 22: RoNW (%) from FY07-13E
17.615.3
16.5
19.4
12.313.8
15.2
0
5
10
15
20
25
2007 2008 2009 2010 2011E 2012E 2013E
Led by increase in NW by Rs.228 from QIP & decline in PAT by ~20bps
With the growth in sales from the anticipated acquisition & expansion; ratios would improve
Source: Company, ICICIdirect.com Research
Higher raw material costs and advertisement expenses would continue to keep margins under pressure.
ICICIdirect.com | Equity Research Page 16
ICICI Securities Limited
Valuation At the CMP of | 276, the stock is trading at 25.1x its FY11E EPS of | 11 and 21x its FY12E EPS of | 13. With the company’s expansion into detergents, fabric wash, aerosols and outdoor repellent products, we have valued the stock at 22x its FY12E EPS, arriving at a fair value of | 292. Also, on comparison of JLL’s stock price with that of the FMCG Index, JLL is trading at 21.4x its FY12E EPS while the FMCG index is trading at 27x its one year forward earnings (estimated). With JLL being a relatively smaller player and in its nascent stage, we believe the discount of ~20% to the index is justified. We are initiating the coverage on the stock with an ADD rating. Exhibit 23: P/E band
0
75
150
225
300
375
450M
ar-0
8
Jun-
08
Sep-
08
Dec-
08
Mar
-09
Jun-
09
Sep-
09
Dec-
09
Mar
-10
Jun-
10
Sep-
10
Dec-
10
Mar
-11
Jun-
11
Sep-
11
Dec-
11
Share Price
20x
15x
10x
5x
25x
Source: Company, ICICIdirect.com Research
Exhibit 24: Comparative performance of JLL’s P/E with that of BSE FMCG Index
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov
-09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep-
10
Nov
-10
Jyothy PE(X) FMCG P/E(X)
Source: Company, ICICIdirect.com Research
Historically, JLL’s stock has been trading in the range of 10-20x
its one year forward earnings. Led by the expansion plans and the
higher earnings, the stock commanded a higher P/E in H1FY11.
ICICIdirect.com | Equity Research Page 17
ICICI Securities Limited
DCF Valuation Using the DCF methodology, we have arrived at a fair value per share of | 292.8 based on WACC of 11.4% and terminal growth rate of 4%. Hence, we are initiating coverage on the stock with an ADD rating. Exhibit 25: WACC Calculation Beta 0.5
Risk free rate 8.0%
Market Return 15.1%
Risk Premium 7.1%
Required rate of return (Cost of Equity) 11.4%
Cost of Debt 11.0%
After Tax cost of Debt 8.6%
WACC 11.4% Source: Company, ICICIdirect.com Research
Exhibit 26: Sensitivity to WACC and terminal growth
10.4% 10.9% 11.4% 11.9% 12.4%3.0% 311 289 269 251 2363.5% 327 302 280 261 2444.0% 345 317 293 272 2534.5% 366 335 307 284 2645.0% 392 355 324 298 275
WACC %
Term
inal
Gr
owth
Rat
e %
Source: Company, ICICIdirect.com Research
DCF Assumptions
DCF Assumptions (FY11E-FY20E)
Rs crore FY11E FY12E FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E
EBITDA 106.4 130.6 158.4 188.2 222.1 261.0 302.7 349.7 402.1 458.4 Depreciation 12.2 13.7 16.2 24.3 28.7 33.7 39.1 45.1 51.9 59.1 Tax 25.1 28.7 34.9 36.1 42.6 50.0 58.0 67.0 77.1 87.8 Capital Expenditure 10.0 70.0 67.9 21.9 25.8 29.5 29.3 33.8 32.4 37.0 Change in Working Capital 42.4 (35.9) 79.3 17.9 28.4 32.6 35.0 39.4 44.0 47.2 Free Cash Flow 28.8 67.9 (23.6) 112.4 125.3 148.9 180.4 209.5 248.6 286.4
DCF Valuation Rs crorePV of firm 2,244.4 AssumptionsLess: Current Debt 10.4 WACC 11.4%Total present value of the Equity 2,234.0 Revenue CAGR over FY11E - FY20E 17.0%Cash Per Share 15.6 Terminal Growth 4.0%Number of Equity Shares outstanding (Cr) 8.1 DCF - Target price (Rs) 292.7
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research Page 18
ICICI Securities Limited
Tables and ratios
Exhibit 27: Profit and loss account (| Crore) (| Crore) FY09* FY10 FY11E FY12E FY13ENet Sales 363.5 598.1 719.9 870.1 1,029.2 Growth (%) NA NA 20.4 20.9 18.3 Other Incomes 7.6 17.8 21.0 18.8 20.5 Total Revenue 371.1 615.9 740.9 888.8 1,049.7 Raw Material Expenses 196.0 322.5 390.3 469.6 547.8 Marketing Expenses 25.1 48.5 68.3 78.3 92.6 Employee Expenses 47.5 75.4 90.6 109.6 129.7 Power & Fuel 10.4 16.0 20.5 26.1 32.4 Administrative Expenses 17.4 23.4 27.0 32.6 38.6
Excise 1.6 1.8 2.2 2.6 3.1 Royalty - - 0.1 1.0 1.9
(Increase)/Decrease in inventory 2.7 (5.3) (7.2) (7.8) (10.3)
Other Operating Expenses 10.1 18.0 14.4 19.6 25.7 Miscellaneous Expenses 3.9 6.1 7.2 7.8 9.3 Total Operating Expenditure 314.7 506.3 613.5 739.4 870.7 Gross Profit 147.0 241.5 294.6 354.8 423.2 EBITDA 48.8 91.8 106.4 130.6 158.4 Growth (%) NA NA 15.9 22.8 21.3 EBITDA Margin (%) 13.4 15.3 14.8 15.0 15.4 Interest 0.7 1.7 1.1 0.8 0.6 Depreciation 7.5 11.4 12.2 13.7 16.2 Less: Exceptional Items - - - - - Total Tax 10.8 21.5 25.1 28.7 34.9 PAT before MI 37.4 75.0 88.9 106.2 127.3 Minority Interest (1.0) (0.3) - - - PAT after MI 36.4 74.7 88.9 106.2 127.3 Growth (%) NA NA 19.0 19.4 19.9 PAT Margin (%) 10.0 12.5 12.4 12.2 12.4 EPS 5.3 10.4 11.0 13.2 15.8 Growth (%) NA NA 6.3 19.4 19.9
Source: Company, ICICIdirect.com Research *2009 figures pertain to 9 months figures from June, 2008 to March, 2009.
ICICIdirect.com | Equity Research Page 19
ICICI Securities Limited
Exhibit 28: Balance sheet (| Crore) (Year-end March) FY09* FY10 FY11E FY12E FY13EEquity Capital 7.3 7.3 8.1 8.1 8.1
Reserve and Surplus 339.6 381.0 713.8 763.4 828.5 Total Shareholders funds 346.9 388.3 721.9 771.5 836.6
Long term Debt - 12.9 10.3 7.7 5.1
Short Term Debt 0.5 0.2 0.2 0.2 0.2 Deferred Tax Liability 10.5 13.3 15.8 18.4 21.0 Minority Interest 0.3 0.5 0.5 0.5 0.5 Sources of Funds 358.1 415.1 748.6 798.2 863.3 Total Gross Block 236.0 277.2 287.2 357.2 417.2 Less Accumulated Depreciation on Ta 48.8 63.5 74.1 86.2 100.7 Net Block 187.2 213.7 213.1 271.0 316.5 Capital Work in Progress in Tangible A 11.0 11.0 11.0 11.0 11.0 Total Fixed Assets 198.2 224.7 224.1 282.0 327.5 Net Intangible Assets 8.9 14.1 12.4 10.8 17.1 Other Investments 0.2 0.0 228.0 228.0 128.0 Liquid Investments 0.0 - 60.0 90.0 135.0 Goodwill on Consolidation 1.0 1.5 1.7 2.1 2.4 Inventory 47.0 73.0 105.6 89.7 153.5 Debtors 42.9 70.7 61.8 95.6 92.2 Loans and Advances 21.8 34.0 39.9 45.3 57.9 Other Current Assets 0.3 1.1 0.3 1.6 0.5 Cash 105.3 120.8 125.9 124.8 113.6 Total Current Assets 217.3 299.7 333.4 357.0 417.6 Creditors 42.2 78.6 69.6 107.9 103.0 Provisions 25.3 46.2 41.3 63.7 61.0 Misc. Exp. Not written off 0.1 - (0.0) (0.1) (0.1) Total Current Liabilities 67.6 124.8 110.9 171.4 163.9 Net Current Assets 149.7 174.9 222.5 185.6 253.7
Misc. Exp. Not written off 0.1 - (0.0) (0.1) (0.1) Application of Funds 358.1 415.2 748.8 798.5 863.6
*2009 figures pertain to 9 months figures from June, 2008 to March,2009 Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research Page 20
ICICI Securities Limited
Exhibit 29: Cash flow statement (Year-end March) FY09* FY10 FY11E FY12E FY13E
PAT 38.4 75.3 88.9 106.2 127.3
Depreciation 7.5 11.4 12.2 13.7 16.2
Inventory 0.8 (26.0) (32.5) 15.9 (63.8)
Debtors (17.5) (27.8) 9.0 (33.8) 3.4
Loans and Advances (2.9) (12.2) (5.9) (5.4) (12.6)
Other Current Assets (0.1) (0.8) 0.9 (1.4) 1.2
Creditors 5.4 36.4 (9.0) 38.3 (4.8)
Provisions 3.2 20.8 (4.8) 22.4 (2.7)
Net cash flow from operating activities 34.8 77.1 58.7 155.8 64.2
Miscellaneous Expenses not written off - 0.1 0.0 0.1 0.0
Other Investments (0.2) 0.2 (228.0) - 100.0
Liquid Investments (0.0) 0.0 (60.0) (30.0) (45.0)
Goodwill on Consolidation - (0.5) (0.2) (0.4) (0.3)
(Purchase)/Sale of Fixed Assets (10.3) (43.1) (10.0) (70.0) (67.9)
Deferred Tax Liability 2.2 2.8 2.5 2.6 2.6
Minority Interest 0.3 0.2 - - -
Net Cash flow from Investing Activities (8.1) (40.2) (295.7) (97.7) (10.6)
Equity Capital - - 0.8 - -
Long term Debt - 12.9 (2.6) (2.6) (2.6)
Short Term Debt - (0.3) - - -
Total Outflow on account of dividend (17.0) (33.8) (37.7) (56.6) (62.3)
Securities Premium Account - - 281.6 - -
Net Cash flow from Financing Activities (17.0) (21.3) 242.1 (59.2) (64.9)
Net Cash flow 9.7 15.5 5.1 (1.1) (11.2)
Cash and Cash Equivalent at the beginning 95.6 105.3 120.8 125.9 124.8
Cash 105.3 120.8 125.9 124.8 113.6
Source: Company, ICICIdirect.com Research *2009 figures pertain to 9 months figures from June, 2008 to March,2009
ICICIdirect.com | Equity Research Page 21
ICICI Securities Limited
Exhibit 30: Ratios % to sales FY08 FY09* FY10 FY11E FY12E FY13E
Raw Material Cost 49.8 53.9 53.9 54.2 54.0 53.2
Staff Cost 13.4 13.1 12.6 12.6 12.6 12.6
Marketing Cost 10.2 6.9 8.1 9.5 9.0 9.0
Profitability Ratios (%) FY08 FY09* FY10 FY11E FY12E FY13E
EBITDA Margin 16.1 13.4 15.3 14.8 15.0 15.4
PAT Margin 13.1 10.6 12.6 12.4 12.2 12.4
Per Share Data FY08 FY09* FY10 FY11E FY12E FY13E
EV 2138.4 2128.7 2125.8 2058.1 2026.6 1990.2
Book Value 44.9 47.8 53.5 89.5 95.7 103.7
Cash 13.2 14.5 16.6 15.6 15.5 14.1
EPS 6.9 5.3 10.4 11.0 13.2 15.8
Cash EPS 8.0 6.3 11.9 12.5 14.9 17.8
DPS 2.0 2.0 4.0 4.0 6.0 6.6
Return Ratios (%) FY08 FY09* FY10 FY11E FY12E FY13E
RoNW 15.3 11.1 19.4 12.3 13.8 15.2
RoCE 16.3 11.9 20.0 12.8 15.0 16.9
Financial Health Ratios FY08 FY09* FY10 FY11E FY12E FY13E
Operating Cash Flows (Rs. Cr.) 77.1 34.8 77.1 58.7 155.8 64.2
Interest Coverage (x) 77.4 58.2 47.3 83.3 138.5 254.9
Debt to EBITDA (x) 0.0 0.0 0.1 0.1 0.1 0.0
Dupont Analysis FY08 FY09* FY10 FY11E FY12E FY13E
PAT/PBT 74.9 79.6 78.0 78.0 78.8 78.5
PBT/PBIT 125.5 116.7 120.0 121.1 115.3 114.0
PBIT/Sales 14.0 11.4 13.4 13.1 13.4 13.8
Sales/Assets 113.5 101.5 144.1 96.1 109.0 119.2
Assets/Net worth 102.7 103.3 106.9 103.7 103.5 103.2
Working capital ratios FY08 FY09* FY10 FY11E FY12E FY13E
Woking cap. / sales 33.4 44.5 54.1 96.6 60.7 140.0
Creditors days 36.2 39.7 36.9 37.6 37.2 37.4
Debtors days 31.8 34.3 34.7 33.6 33.0 33.3
Inventory turnover days 42.9 47.6 36.6 45.3 41.0 43.1
Current ratio 3.2 3.2 2.4 3.0 2.1 2.5
Quick ratio 1.6 1.7 1.4 1.9 1.4 1.9
Cash to assets 0.5 0.5 0.4 0.4 0.3 0.3
Y-o-Y Growth(%) FY08 FY09* FY10 FY11E FY12E FY13E
Net Sales 4.5 -4.2 66.0 20.4 20.9 18.3
EBIDTA 12.7 -20.1 88.3 15.9 22.8 21.3
Net Profit 12.7 -20.1 88.3 15.9 22.8 21.3
EPS 12.7 -20.1 88.3 15.9 22.8 21.3
Valuation FY08 FY09* FY10 FY11E FY12E FY13E
PE 40.3 52.4 26.7 25.1 21.0 17.5
EV/EBITDA 35.1 43.7 23.2 19.4 15.5 12.6
EV/Sales 5.6 5.9 3.6 2.9 2.3 1.9
Div Yield(%) 0.7 0.7 1.4 1.4 2.2 2.4
Price/BV 6.2 5.8 5.2 3.1 2.9 2.7*2009 figures pertain to 9 months figures from June, 2008 to March,2009
ICICIdirect.com | Equity Research Page 23
ICICI Securities Limited
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: 20% or more; Buy: Between 10% and 20%; Add: Up to 10%; Reduce: Up to -10% Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 7th Floor, Akruti Centre Point, MIDC Main Road, Marol Naka, Andheri (East) Mumbai – 400 093
ANALYST CERTIFICATION We /I, Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures: ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business.
ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.
It is confirmed that Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report.
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