Buy Jyothy Laboratories - Q3FY12 Result Review - PINC Research

Q3FY12 Result Review - Jyothy Laboratories - Getting On The Track; Maintain 'BUY'; TP Rs212

Getting On The Track

Jyothy Labs (Jyothy) reported net sales growth of 13% led by 20% growth in 'soaps and detergent' segment. Strong operational performance resulted into 500bps YoY and 1,200bps QoQ expansion in EBITDA margin to 17% (PINCe 10%). Strong growth in its high margin 'soaps and detergent' segment led to improvement in the performance. PAT grew by 72% to Rs291mn (PINCe Rs200mn). On the other hand, Henkel India (Henkel) displayed muted performance due to temporary shut down of Karaikal plant. Its net sales declined by 28% QoQ and 33% YoY. We maintain our 'BUY' rating on the stock with a TP of Rs212.

- Stabilisation of standalone business
- Strong standalone EBITDA margin
- Henkel's muted performance

VALUATIONS AND RECOMMENDATION

We believe visibility in the business would improve with subsequent quarter's better performance. We maintain 16x multiple to Jyothy's FY13 earnings and add Rs12/share NPV on tax saving of Rs1.2bn at 12% discount rate. We maintain our 'BUY' recommendation with a TP of Rs212.

Source : Equity Bulls

Keywords