BUY. JYOTHY LABORATORIES LTD Result Update (CONSOLIDATED BASIS): Q2 FY16. CMP Target Price DECEMBER 29 th 2015.

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1 BUY CMP Target Price JYOTHY LABORATORIES LTD Result Update (CONSOLIDATED BASIS): Q2 FY16 DECEMBER 29 th 2015 ISIN: INE668F th h, 2013 Index Details Stock Data Sector Household Products BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) As on Sep 2015 As on Jun 2015 PROMOTER FIIs DIIs OTHERS Year Comparative Graph JYOTHY LABORATORIES LTD S&P BSE SENSEX Highlights Jyothy Laboratories Ltd, a FMCG company began as a proprietary concern that manufactured and sold a single product in a single district has grown to become a multi-brand, multi-product company with operations all over the country. The consolidated Net Sales of the company rose by 9.11% from Rs mn to Rs mn in the current September quarter. During Q2 FY16, consolidated Net profit grew by 54.28% to Rs mn from Rs mn in Q2 FY15. Consolidated EBIDTA has rise by 43.94% YOY from Rs mn to Rs mn in current September quarter. Consolidated PBT has rise by 78.78% YOY from Rs mn to Rs mn in current September quarter. The EBITDA margin for the quarter stood at 13.8% as against 10.7% over the same period last year. EPS stood at Rs in Q2 FY16 as compared an EPS of Rs in Q2 FY15. Revenues of Soaps and Detergent business stood at Rs mn in Q2 FY16 compared to Rs mn in Q2 FY15; up by 7.3%. Home Care business revenues for the quarter ended 30 th September 2015 at Rs mn up by 16.3% as against Rs mn. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 80% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Jyothy Laboratories Ltd ESS DEE Aluminium Ltd Pee Cee Cosma Sope Ltd Hipolin Ltd

2 QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS) Q2 FY16 Net Sales of the company rose by 9.11% from Rs mn to Rs mn in the current September quarter. Net profit grew by 54.28% to Rs mn from Rs mn in Q2 FY15. EBIDTA has rise by 43.94% YOY from Rs mn to Rs mn in current September quarter. EPS stood at Rs in Q2 FY16 as compared an EPS of Rs in Q2 FY15. Particulars Q2 FY16 Q2 FY15 % Change Net Sales Net Profit EPS EBIDTA Break up of Expenditure Rs. In Mn Q2 FY16 Q2 FY15 % Change Cost of Raw Material % Purchase of Traded Goods % Employee Cost % Employee stock option expenses % Advertisement & sales Promo Exps % Depreciation, amortization & % impairment Other Expenditure % Segment Revenue

3 Latest Updates For the six months period, JLL reported Net Sales of Rs mn compared to Rs mn in H1FY16; recording a rise of 8.2%. Net Profit for H1FY16 stood at Rs mn compared to Rs mn; up 23.3% compared to the corresponding period of the previous fiscal. The EBIDTA margin for the six months period to September 30 th 2015 was at 15.2% as against 12.1% reported in H1FY15. COMPANY PROFILE Jyothy Laboratories Ltd, a fast moving consumer goods Company was founded in 1983 by Mr. M P Ramachandran. Over the years the company has evolved from a single product proprietary firm into a multi brand, BSE & NSW listed company involved in the manufacturing and marketing of products in fabric care, mosquito repellant, surface cleaning and personal care. The company has 10 brands in its kitty including Ujala, Maxo, Exo, Henko, Pril, Margo, Neem, Fa, Mr. White and Chek that are well-known and established brands in their respective categories. The Company is also engaged into service sector in organized laundry to provide World class laundry at affordable price at your doorstep through its subsidiary Jyothy Fabricare Services Limited.

4 FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as on 31 st March E JYOTHY LABORATORIES LTD FY14A FY15A FY16E FY17E EQUITY AND LIABILITIES: Shareholders Funds: a) Share Capital b) Reserves and Surplus Net worth (1) Minority Interest (2) Non-Current Liabilities: a) Long-term borrowings b) Deferred Tax Liabilities [Net] c) Other Long Term Liabilities d) Long Term Provisions Sub Total Non-Current Liabilities (3) Current Liabilities: a) Trade Payables b) Other Current Liabilities c) Short Term Provisions Sub Total Current Liabilities (4) Total Liabilities ( ) ASSETS: Non-Current Assets: Fixed Assets: i. Tangible Assets ii. Intangible Assets iii. Capital work-in-progress a) Sub Total - Fixed Assets b) Non Current Investments c) Long Term Loans and Advances d) Other Non Current Assets Sub Total Non Current Assets (5) Current Assets: a) Current Investments b) Inventories c) Trade Receivables d) Cash and Bank Balances e) Short Term Loans and Advances f) Other Current Assets Sub Total Current Assets (6) Total Assets (5+6)

5 Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Profit After Tax Minority Interest Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 st Mar, 2015 to 31 st Dec, 2015E Value(Rs.in.mn) 31-Mar Jun Sep Dec-15E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Profit After Tax Minority Interest Net Profit Equity capital Face value EPS

6 Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) EBITDA Margin (%) 12.49% 11.42% 13.38% 13.44% PBT Margin (%) 6.18% 8.22% 10.93% 11.07% PAT Margin (%) 6.13% 7.99% 9.23% 9.35% P/E Ratio (x) ROE (%) 13.88% 15.52% 16.22% 15.24% ROCE (%) 17.06% 16.72% 18.02% 17.67% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

7 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY16E and x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 80% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at x for FY16E and x for FY17E. Price to Book Value of the stock is expected to be at 5.80 x and 4.91 x for FY16E and FY17E respectively. Q2 FY16 was a better quarter with the company reporting higher growth in profitability. Most of company power brands outperformed the market and helped further strengthen its position. Jyothy Laboratories continue to invest in building its brand equity with an aim to achieve higher consumer mindshare. With company s differentiated positioning and value product offerings, Jyothy Laboratories is confident to grow ahead of the industry in the coming quarters. Hence, we recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment.

8 INDUSTRY OVERVIEW The consumer market landscape in India has taken rapid strides in terms of shifts in buying behaviour influenced by increased urbanisation, a growing middle-class, altering lifestyles and the emergence of the retailer as a powerhouse, to affect and sway the consumer s decision making. Despite this, the Indian FMCG industry, over last three years, witnessed growth challenges. Sales were impacted by a weak economy, persistently high inflation, subdued consumer confidence, all of which have had a direct bearing on demand. The tide, nonetheless, is expected to gradually turn as confidence in the market rebounds, leading to a sustained demand recovery. In 2014, consumer optimism witnessed a sharp turnaround, after a few years of adverse macro conditions (e.g. high inflation, slowing growth) that led to a steady decline as per the Credit Suisse Emerging Consumer Survey. The formation of a strong government at the centre (the first single party majority in 30 years) has triggered a major revival in consumer sentiment. As a result, India ranks first on the Credit Suisse Emerging Consumer Scorecard 2015, unseating China a big improvement from last year when it was ranked fourth. The study highlights that more people believe this is a good time for making big ticket purchases as average household income increased by around 10% in 2014 after being relatively steady during the last two years. The survey conducted to gauge consumer sentiment across nine emerging economies has seen India jump from the fourth to the first rank. The three key metrics to estimate consumer sentiment included medium term expectations of personal finances, expectations of inflation, and household income trends alongside their immediate spending intentions. This revival in consumer sentiment has been primarily driven by urban India. The Government of India has also played a major role in the growth of this segment. It has enacted policies to attract new capital and also to boost consumption and thereby give impetus to economic growth. The announcements in the budget 2015 pertaining to Financial Inclusion, Swachh Bharat movement to regenerate India and game-changing reforms on the anvil such as Goods and Service Tax (GST), Jan Dhan, Aadhar and Mobile (JAM) - for direct benefit transfer - auger well for the FMCG sector. Outlook The Indian FMCG industry is expected to grow by 10% in 2015 and by about 12% in 2016, taking the sales in 2016 to US$ 49 billion predicts Nielsen. Distribution growth, innovations around sachet offerings, employment rates and index of industrial production (IIP) continue to be key influencers of FMCG sales in India. The lower inflationary trend is likely to translate into higher disposable incomes, aiding consumption growth. The India s market is consumer driven, with spending anticipated to more than double by This has

9 resulted in the Indian consumer segment, broadly classified into urban and rural markets, becoming the focus of marketers from around the world. For global conglomerates, India is an indispensable market for expanding their market share going forward. India s young demographic and a middle class with rising disposable income is a key contributor to this. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.

10 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma & Diversified U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified G. Amarender Diversified Firstcall Research Provides Industry Research on all the Sectors and Equity Research on Major Companies forming part of Listed and Unlisted Segments For Further Details Contact: Tel.: / / Telefax: / info@firstobjectindia.com