|Financial Snapshot(Rs.in crores)|
|CMP 12 March 2010||175|
|EPS (TTM) *||7.29|
|Debt Equity Ratio||0.00|
|Return On Networth||11.38|
* Calculated on adjusted profit after extra-ordinary items
Jyothy Laboratories was established in 1983 by M.P. Ramachandran. Jyothy Laboratories started by manufacturing and selling a single product, Ujala Supreme though today Jyothy Laboratories has business activities in fabric care, household insecticide, surface cleaning, personal care and air care segments. Jyothy Laboratories‘ key brands include Ujala, Maxo, Exo, Jeeva and Maya. Jyothy Laboratories was listed in Dec 2007 through an IPO priced at Rs 690. In August 2008, the face value of the share was reduced to Rs. 1 from Rs. 5.
Jyothy Laboratories has three popular products:
Jyothy Laboratories‘ flagship product is “Ujala”, the liquid fabric whitener. This is a a Rs 400 crore market and Jyothy Laboratories holds a 80% share of this market. Jyothy Laboratories sells about 1 million bottles of these each day. It has a strong distribution network with a total reach of 2.9 million outlets. Jyothy Laboratories‘s distribution network has been set up over the past 25 years. It will enable the launch of the other products of Jyothy Laboratories.
Jyothy Laboratories second product is Exo. Exo has a market share in value terms in South India of about 24%. This increased from 8.4% at launch in Jun 2004. At a national level, the market share is 7% and it is the 2nd largest selling brand of dishwasher. The brand registered a 100% growth last year. and Jyothy Laboratories has plans to launch the brand on a nation-wide basis.
‘Maxo’ Mosquito coils
Jyothy Laboratories‘ third product is mosquito coils. It has a market share in value terms of about 23% and contributes 37% to Jyothy Laboratories‘ revenues.
Jyothy Laboratories is no longer dependent on Ujala Supreme but has two other successful products to bolster revenue. Jyothy Laboratories has has other products such as Maya incense sticks and Jeeva soaps which were launched in 2001/ 2002. Jeeva is an Ayurvedic and natural bath soap product that is available in different fragrances. These are products with limited demand.
Jyothy Fabricare Services Ltd: As a part of diversification, Jyothy Laboratories has started a ‘laundry care services’ business to provide personalized laundry care services to retail, institutional, and door-to-door consumers. The Plant has been set up in Bangalore with a capacity to service upto 40K garments a day (10 tonnes). The total investment for this project is 35 crores. Jyothy Fabricare has acquired Snoways, an existing laundry chain, and added 16 more outlets to the existing 8, washing 2000 garments a day. On the institutional end, Jyothy Fabricare has acquired several clients in the airlines, hotels, restaurants sectors which need bulkwash of clothing items everyday.
Jyothy Laboratories is possibly the cheapest stock in terms of valuation in the FMCG space. It has a very small equity of 7.5 crore, absolutely no debt in the books. Jyothy Laboratories is expected to report an earning per share of around Rs 12 in the current year for Re 1 face value, which should go up to around at least Rs 16 next year and around Rs 19 in 2011-2012. It has got cash of around Rs 23 per share in the books.
Effectively, Jyothy Laboratories is available for a valuation of less than 8 times its 2011-2012 earnings if the cash is excluded.
One reason for the cheap valuations of Jyothy Laboratories is the perceived risk of Jyothy Laboratories being a single product company and dependent on Ujala. However, that is changing and Jyothy Laboratories is slowly but steadily beoming a multiproduct and multibrand company. Of course, it does not have as many products and brands as any other FMCG company may have.
It makes sense to invest in Jyothy Laboratories because it is virtually debt-free, has a good dividend track record, enjoys good margins and a high ROE. It has a strong grip into its product categories due to a superior distribution network. The price is at a bargain.
Jyothy Laboratories Research Report
JYOTHY LABS FINANCIAL RESULTS FOR FY 2010
In FY 2010, Jyothy Labs reported sales of Rs. 598 crores. In FY 2009 (which was for 9 months), Jyothy Labs reported sales of Rs. 363 crores. The Profits from Operations before other income, interest and tax of Jyothy Labs was Rs. 85.53 crores representing a margin of 14.30% of the sales. In FY 2009, the margin of Jyothy Labs was 11.57%. If the Other Income of Rs. 11.07 crores is taken into account, the EBITA was Rs. 96.59 crores representing a margin to sales of 16.15%.
Jyothy Labs’ Net profit for the year stood at Rs. 74.34 crores representing a margin of 12.43% as compared to last year’s margin of 10.56%.
Jyothy Labs’ total capital employed was Rs. 401.13 crores. The Return on Capital Employed (ROCE) was an attractive 24%.
Jyothy Labs has a minor loan of Rs. 13.05 crores and continues its virtual debt-free status.
Jyothy Labs’ EPS per share was Rs. 10.24, up 93.57 last year’s 9 month EPS of Rs. 5.29. At the present CMP of about Rs. 200, the PE is 19.53.
Jyothy Labs has declared a dividend of Rs. 4 per share of Rs. 1 (400%) represtning a yield of 2% at the present CMP of about Rs. 200.
Jyothy Labs Growth Drivers
Jyothy Labs’ star product are Ujala, Exo dish wash and Maxo liquid. These are expected to gain more market share in FY 2011. The mosquito repellent will also contribute to the growth prospects.
Jyothy Fabricare Services Ltd is also a relatively new concept that appears to be catching on amongst corporate and individual customers and adding to the revenue of Jyothy Labs