Jyothy Laboratories Ltd.

(JLL)

Stock Note March 28, 2014

HDFC sec CMP Averaging Price Price Target Time
Industry Recommended Action
Scrip Code (Rs.) Band (Rs.) (Rs.) Horizon
JYOLABEQNR FMCG 201.5 Buy at CMP & add on dips 174-185 232 1-2 quarters

Background
Price Chart
1-JYOTHYLAB.Jyothy Laboratories Limit.NSE - 27/03/14 Trend

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Jyothy Laboratories Ltd (JLL) came into being in 1983, powered by the vision
D 215

210 of one man M P Ramachandran - the current Chairman & Managing Director.
Starting from the momentous launch of Ujala, carving out a new product
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D
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category of liquid fabric whitener, JLL today manufactures and distributes
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brands across product categories as diverse as Fabric Care, Household
Insecticide, Utensil Cleaners, Fragrances, Personal Care, besides marketing
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165

tea and coffee brands.

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Triggers
25 M 17 29 J 20 J 12 24 A 19 29 S 23 O 17 29 N 21 D 13 26 J14 17 29 F 20 M 18 27 Daily

Stock Details
JLLs consolidated net sales are likely to grow by 20.5% over FY13-15, likely
BSE Code 532926 to be driven by brand and geographical extension and aggressive marketing
NSE Code JYOTHYLAB initiatives. The companys power brands could report strong growth,
Bloomberg JYL IN especially the flagship brand, Ujala, which would continue to be a major
Price (Rs) as on Mar 27, growth catalyst. Restructuring initiatives have started to yield results in the
2014 201.5 form of margin improvement and are expected to gradually reflect into
Equity Capital (Rs Mn) 181.0 market share gains & growth across power brands.
Post integration with Henkel, JLL is likely to benefit from new sales team,
Face Value (Rs) 1.0
distribution integration, reduction of channel margin, and overhead
Eq. Shares O/s (mn) 181.0 optimization starting this year. The integration is likely to yield benefits going
Market Cap (Rs Mn.) 36,471.5 forward. Revenues will receive a boost from the merger on a minimal equity
Book Value (Rs) 39.6 expansion. The management said that it is exploring inorganic growth
opportunities, mostly a regional brand, post successfully turning around
Avg. Volume (52 Week) 25,132
Henkel after its acquisition.
52 wk H/L 223.1/ 142.5 OPM is likely to improve over the next two years on the back of improved
product mix, reduction in trade margins and cost rationalization. Reduction in
interest cost, NIL tax liability would result in significant improvement in PAT
Shareholding Pattern growth and margins.
(As on Dec 31, 2013) % Holding JLLs current discount to its peers like HUL, Godrej Consumer and P&G
India is largely on the back of JLLs smaller business size, lower profitability
Foreign 15.3
and return ratios compared to its peers and lack of geographical & product
Institutions 8.6 diversification (47% presence in South and more dependence on Soaps &
Promoters 66.7 detergents, especially Ujala fabric whitener). However, with significant
Non-Promoter Corp Hold. 3.1 improvement expected in profitability over the next two years on the back of
restructuring initiatives undertaken, we expect the discount in valuations to
Public & Others 6.3
narrow. We expect JLLs sales & profit growth to be faster than its peers
Total 100.0 over the next two years. Improved profits could result in higher dividend
payouts and improve the valuations further.

Consolidated Financials at a Glance: (Rs. in Mn)

Particulars FY11 FY12 FY13 FY14E FY15E
Net Sales 6194.9 9126.2 11041.5 13581.1 16025.7
% Growth (y-o-y) -3.2 47.3 21.0 23.0 18.0
Operating Profit 792.8 840.9 1296.7 1928.5 2298.4
% Growth (y-o-y) -13.6 6.1 54.2 48.7 19.2
PAT (Adjusted) 687.6 445.8 626.3 1255.2 2097.1
% Growth (y-o-y) -7.5 -35.2 40.5 100.4 67.1
EPS 4.3 2.8 3.9 6.9 11.6
% Growth (y-o-y) -7.5 -35.2 40.5 78.6 67.1
PE 47.3 72.9 51.9 29.1 17.4

Valuation & Recommendation

Valuing the stock at 20xFY15E EPS, we arrive at a price target of Rs. 232. We
recommend investors to buy this stock at the current levels and average it on
dips in the price band of Rs. 174-185 (15-16xFY15E EPS) for our price target
over the next quarter.
Retail Research 1
Business Profile

Jyothy Laboratories Ltd (JLL) came into being in 1983, powered by the vision of one man M P Ramachandran - the current
Chairman & Managing Director. Started as a proprietary concern, manufacturing and selling a single product in a single
district, the organization has grown to become a multi-brand, multi-product company with operations all over the nation.

Starting from the momentous launch of Ujala, carving out a new product category of liquid fabric whitener, JLL today
manufactures and distributes brands across product categories as diverse as Fabric Care, Household Insecticide, Utensil
Cleaners, Fragrances, Personal Care, besides marketing tea and coffee brands. In addition to its own brands, JLL has
ventured into the business of coffee, tea and spiritual / astrological dhoops. The company has also inked a MoU to establish a
joint venture in Bangladesh to manufacture and market Ujala and Maxo.

JLLs business can be categorized into three segments viz; i) Soaps & Detergents (includes fabric whitener, fabric detergent,
dishwash bar and soaps); ii) Home Care (includes incense sticks, scrubber, dhoop & mosquito repellents); iii) Laundry
services (includes dry cleaning and laundry) and iv) Others (includes Body Care, Tea & Coffee). Soaps & Detergents accounts
for 72.2% to the total consolidated revenues (in FY13), while Home Care contributes 22.2%. Laundry business accounts for
4%, while the balance 1.7% comes from Others category. JLL operates the countrys biggest laundry chain with 103 retail
outlets through its wholly owned subsidiary Jyothy Fabricare Services Limited (JFSL) with current Operation in Bangalore,
Delhi, Mumbai, Pune, Chennai, Jaipur and Ahmedabad.

Segmental revenue breakup in FY13 (Conso):

Laundry Others 1.7%

Services 4.0%

Home Care
22.2%

Soaps &
Detergents
72.2%

On a standalone basis, Soaps & Detergents contributed 74.3%, Home Care 24.1% & others 1.6% in FY13. In 9MFY14 their
respectively contribution stood at 77.7%, 20.6% & 1.7%.

JLL has 10 brands in its portfolio including Ujala, Henko, Mr White, and Chek in the soaps and detergents segment,
Maxo, Exo, and Pril in the home care segment and Fa, Neem, and Margo brands in the personal care segment.

JLLs Brands

Liquid blues & Dishwash bars/liquids Personal Care Home care

Detergents

Ujala, Henko, Mr. Exo, Pril Margo, Fa, Neem Maxo

White, Check

Retail Research 2
Geographically, JLL has a strong hold in South India. The company derives around 48% of its revenues from South [Kerala,
Karnataka & Tamil Nadu], followed by 21% contribution from East, 19% from North, 10% from West and the balance 2%
contribution from exports (in FY13). In Q3FY14, Southern markets contribution stood at 47%.

Geographical revenue breakup: (FY13)

West Exports North

10% 2% 19%

East
21%

South
48%

JLL has a battery of 21 modern manufacturing units at 14 locations across the country. Besides separate plants for
manufacturing the entire product range, the company also has infrastructure for Machine Design & Manufacture, to cater to in-
house production requirements. The company has a vast distribution network with its products available in 2.9 mn outlets in
India along with direct reach to 1 million outlets.

As on March 31, 2013, JLL had 4 direct subsidiaries (3 Indian & 1 overseas) and 5 indirect subsidiaries (Indian), the details of
which are given below:
(Rs. in Mn)
Subsidiary Country % holding FY13 Turnover FY13 PAT
Associated Industries Consumer Products Pvt. Ltd. India 100 82.6 5.5
Jyothy Fabricare Services Limited India 75.09 200.9 -144.0
Jyothy Kallol Bangladesh Limited Bangladesh 75 - 3.0
Jyothy Consumer Products Marketing Ltd. (formerly known India 95.99 1897.8 -122.5
as Henkel Marketing India Ltd
Snoways Laundrers and Drycleaners Pvt. Ltd. (Note 1) India 36.61 - 0.0
Diamond Fabcare Private Ltd. India 74.71 91.7 -90.0
Akash Cleaners Private Limited India 74.71 123.9 -13.4
Fab Clean & Care Private Limited India 74.71 15.0 5.0
Four Seasons Dry Cleaning Co. Private Limited India 74.71 14.4 -6.8
(Source: Company Annual Report)
Note: Snoways Laundrers and Drycleaners Pvt. Limited, Diamond Fabcare Pvt. Limited, Akash Cleaners Private Limited, Fab Clean & Care
Private Limited, Four Seasons Dry-Cleaning Co. Pvt. Limited are subsidiaries of Jyothy Fabricare Services Limited

The above subsidiaries in total contributed 7.9% to the total net sales of JLL. JLL has set up a joint venture in Bangladesh with
Kallol Enterprise Limited for setting up a state-of-art manufacturing facility and marketing of all products of the Company and
HIL in a phased manner.

Amalgamation of Jyothy Consumer Products Ltd with JLL: JLL had one more subsidiary Jyothy Consumer Products Ltd
(JCPL), formerly known as Henkel India Limited [83.65% stake]. However, during the year ended March 31, 2013, JCPL was
amalgamated with the company on approval by High Court of Mumbai w.e.f. April 01, 2012. In FY12, JCPL reported Net sales
of Rs. 5046.7 mn and a net loss of Rs. 408.8 mn. In 9MFY13, the net sales stood at Rs. 2671.8 mn (down 23.6% over
9MFY12) and the company reported net loss of Rs. 331.8 mn. JCPL comprises of national and international brands such as
Pril, Henko, Fa, Margo, Mr. White, and Chek.

Equity Share Capital of JLL post merger: As per the scheme of arrangement, shareholders of JCPL got 1 share of JLL for
every 8 shares of JCPL, subject to adjustment for impending issue of bonus shares in the ratio of 1:1 by JLL (JLL became ex-
bonus in July 2012). The shares held by JLL in JCPL got extinguished post merger. After the merger, equity of JLL increased
by 2.87% to Rs. 166 mn (in Q1FY14).

Retail Research 3
Fund Raising through preferential allotment increases the equity capital further: In Q3FY14, JLL raised Rs. 2627.3 mn
by way of a preferential allotment of 15 mn shares at Rs. 175.15 (including premium of Rs. 174.15 per share). The shares
were issued to Sahyadri Agencies Ltd., a promoter group entity. With this fund raising, JLLs equity capital increased to Rs.
181 mn in Q3FY14.

Fund raising through issue of redeemable zero coupon non-convertible debentures: In Q3FY14, JLL raised Rs. 4000
mn through issue of 4000 redeemable zero coupon non-convertible debentures of a face value of Rs. 10 lacs each on a
private placement basis. The debentures are redeemable on Nov 14, 2016 at a premium of Rs. 3,68,022 per debenture (total
premium on redemption Rs. 1470.5 mn)

The company plans to utilize the above funds raised (total Rs. 6627.3 mn) for reducing its borrowings and for acquisition
purpose. We have factored these capital raising initiatives in our financial projections for FY14 & FY15.

Investment Rationale

Strong portfolio of brands with leadership in fabric whitener; growth momentum in power brands to
sustain

JLL currently has a formidable array of brands with strong consumer equities, excellent product quality and an amazingly loyal
consumer base. The company has had a history of successful new product launches, has had the gumption to enter
competitive market segments and create brands that are either Number 1 or Number 2 or strong challenger brands in every
category where it is present. The bedrock of its success has been great consumer insights, deep distribution reach, strong
execution capabilities, fiercely passionate employees and an aggressive feet-on-street army scouring all rural markets and
distributing products with great pride, vigour and passion.

Today, JLL has 10 brands in its portfolio including Ujala, Henko, Mr White, and Chek in the soaps and detergents segment,
Maxo, Exo, and Pril in the home care segment and Fa, Neem, and Margo brands in the personal care segment (JLL got
access to brands like Pril, Henko, Fa, Margo, Mr. White, and Chek post acquisition of Henkel, which has now been
amalgamated with JLL). Ujala fabric whitener is a flagship brand, which commands volume & value market share of 59.1% &
72.6% respectively with retail penetration of 70.1% and revenue contribution of ~16% (in FY13). The table below gives an
overview of domestic market size & JLLs market share in its various product categories:

Product Category Industry Size CAGR growth over JLLs brands Value market Volume market
(Rs. in Bn) FY11-13 (%) share (%) share (%)
Liquid Blues 5.24 7.5 Ujala Fabric 59.1 72.6
Whitener
Coils 14.8 11.1 Maxo 16.2 17.9
Washing Powder 110.9 16.2 Henko, Chek, 7 (Premium -
Mr. White Segment)
Dishwash Bars 15.4 24.1 Exo, Pril Exo Bar: 11.1 Exo Bar: 9.6
Dishwash Liquid 129.4 23.5 Exo, Pril Pril Liquid: 20.8 Pril Liquid: 20.2
(Source: Company Data)

In Q3FY14 the market share of the brands stood at: Ujala Fabric Whitener: Volume: 58%, Value: 73%; Maxo Coil: Volume:
18%, Value: 17%; Maxo Liquid: Volume: 5%, Value: 5%; Pril Liquid: Volume: 15%, Value: 16%; Exo Bar: Volume: 9%; Value
10%). Ujala fabric whiteners revenue contribution in Q1, Q2 & Q3 of FY14 stood at 20%, 18% & 20% respectively.

JLL has identified 7 key power brands - Ujala, Pril, Exo, Henko, Maxo, Fa, Margo. It is focusing on strengthening them in terms
of market position and top line and bottom line growth. The table below gives an overview of JLLs key strategies to boost the
growth and improve market share across power brands going forward:

Power Brands Strategy

Ujala For the first time in 3 decades, JLL launched Ujala in new packaging with a new TV Commercial
titled Safedi ke age Ujala. JLL plans to increase the brands market share across India. It plans to
extend Ujala brand to detergents to capitalize on mid-price detergents growth in south along with
new communication and packaging. Besides having a strong presence in Kerala, JLL has launched
detergent in other Southern states of Andhra Pradesh and Karnataka in June 2013.
Exo JLL has come up with new communication to focus more on anti-bacterial quality of Exo.
Maxo With reduction in trade margin and increasing contribution of more profitable liquids/vaporizer, JLL is
focusing on improving the brands bottomline, which was impacted in the last few quarters. It plans to
improve the growth rate and gain market share in coil & vaporizer / liquid in the coming years with a
step up in investments in the brand with a new ad campaign and packaging. JLL recently launched
a low-smoke variant in coils.
Fa Brand has been positioned with new packaging in womens deodorant segment & the new TV
Retail Research 4
 commercials for it are already on air since June 2013. Further, JLL has reduced its SKU size to
facilitate easy carrying. Further, it has introduced four new fragrances in smaller sized bottles.
Margo JLL plans to make the brand available across India and improve its market share from 10% in FY13
with new TV commercial already on air. The company is planning to take the brand it national from
predominantly south and east presence.JLL is planning to extend brand to glycerin, face wash, soap
variants. Brand extension to adjacent category leveraging Margo equity is planned for Q1FY15.
Pril JLL is looking to double its ad-spend on Pril in FY14. New TVCs for Pril are already on air since
June 2013. It is planning to increase the share in the non south markets through new campaigns.
Focus would continue to remain on top 10 cities, which contribute around of the brands sales.
Henko The company plans to re-launch brand in new package and price point. It is looking to improve its
market share in the premium detergents segment (Rs. 25 bn category) from current 7% going
forward through new brand communication. New initiatives on brand is expected from Q1FY15.

JLLs soaps & detergents segment (which includes fabric whitener, fabric detergent, dishwash bar and soaps) reported robust
growth of 25% in FY13. This growth momentum continued in 9MFY14, as the segment revenues grew by 26.6% over
9MFY13. The growth has been led by Ujala, which witnessed strong growth in 9MFY14 (Q1FY14: 37%, Q2FY14: 77%; in
Q3FY14: saw double digit growth). In the detergents category, the growth has been below expectations over the last three
quarters due to intense price/promotion war between the top two players. The dishwash category has witnessed strong double
digit growth over the last two quarters. Henko has been growing well over the last two quarters. While the home care category
grew at a slower pace by 12.3% in FY13, the growth rate 19.4%, largely driven by Maxo liquid. The others category, which
includes brands like Fa & Neem, disappointed in FY13 with a decline in revenues, but managed to bounce back well in
9MFY14, growing by 42.5%.

With the new strategies (like new brand communication, new campaigns, re-launch in new packaging, brand extensions,
geographical extensions), we expect JLLs revenue growth to accelerate in both soaps & detergents and home care segment
in the coming quarters. Ujala fabric whitener would continue to remain a major growth driver. The brand has undergone a
complete makeover with change in packaging with an attractive sleeved bottle, giving it a modern outlook. The new look has
helped the brand reinforce its value to current users and will appeal to new users. The management has received encouraging
response to the recent aggressive stepping up of ad-spends in Margo and Henko (in April 2013) and Exo and Pril (in May
2013). This gives an indication that the growth in these power brands would recover in the coming quarters. In dishwash
(especially liquids) which is a low penetration category, higher marketing would lead to accelerated growth in the category. For
FY15, the company will continue to build on Ujala fabric whitener's new platform through sustained marketing activity, will re-
launch Henko with a completely new positioning and formulation in Q1 FY15, will extend Margo brand in skin care category
and has planned several activities for Maxo in FY15 including entry into low smoke coil and a break-through innovation in
Maxo. The company now is focusing more on Maxo liquid and has a target of increasing its contribution from present 24% to
50% in Household Insecticide business in next 2-3 years.

As per CII, the FMCG market is set to treble from US$ 11.6 bn in 2003 to US$ 33.4 bn in 2015. Penetration level as well as
per capita consumption in most product categories in India is low, indicating untapped market potential. The rapidly growing
Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products
like JLL to convert consumers to branded products. Growth is also likely to come from consumer 'upgradation' in the matured
product categories. JLL, with its business experience and new strategies, is well placed to leverage its strength and exploit the
available opportunities.

Restructuring initiatives have started to yield results in the form of margin improvement, to gradually
reflect into market share gains & growth across power brands

The following are some of the new developments and initiatives undertaken by JLL in FY13:

Set up of new management team (JLL appointed new CEO Mr. S Raghunandan w.e.f Mar 2012. He has experience in
professionalizing a family run business and also holds credit of turning around the business of Paras Pharma in just 3 years.
He further appointed new people at the top management level, which includes one head each in manufacturing, R&D,
packaging, procurement & modern trade and three category heads.
Rationalisation of Channel margins (reducing trade margins by 2-4% and distribution margins by 2%)
Consolidation of distribution network and movement to C&F model, Rationalisation of Field Sales force (Earlier, the
company was functioning with owned depots and Commercial Sales Agents whereas it has now shifted its thrust to C&F
outlets. The top 20% of key distributors would be covered by the companys field force, while the rest will be taken care of by
the distributors salesmen. In the rural areas, JLL is distributing through a super stockist. Zonal Commercial Structure has
been set up, to expedite business with distributors & faster settlements. This would result in savings in distribution cost)
Formulation of new brand strategy with communication across brands
Consolidation of manufacturing facilities and improving cost competitiveness through improvement in operational efficiencies
and capacity de-bottlenecking. The company has shut down its facilities in Bhubaneshwar and Chennai and shifted
production to Uttaranchal and Pondicherry, respectively.

Retail Research 5
These restructuring initiatives have started to yield results, as evident from 9MFY14 results, wherein the operating margins
improved by 237 bps Y-o-Y. We feel it would gradually reflect into market share gains & strong growth across the power
brands as well in the next one to two years. The distributor and channel margin rationalization process is now complete and
has aided part of the realization growth in 9MFY14. The benefits of the same would flow in the coming quarters as well. The
benefit of bringing an experienced team on board led by S Raghunandan has clearly started to reflect in JLLs performance
and is likely to create a huge value by leveraging the potential of JLLs brands and improving efficiencies going forward.

Debt-Equity to reduce due to capital raising initiatives, robust operating cash flows & lower CAPEX over
next 2 years; likely to boost the bottomline

In FY12, the company raised debt of Rs. 5000 mn to fund the Henkel acquisition. As a result, the total borrowings increased
from Rs. 691 mn to Rs. 5660 mn in FY12. In FY13, it further increased to 6259 mn. The debt-equity climbed from 0.1x in FY11
to 1x in FY13. However, over the next two years, we expect the debt to reduce. JLL is unlikely to incur any major CAPEX over
FY13-15. Further, we expect the company to generate strong operating cash flow over the next two years (average: Rs. 2.1 bn
p.a), as we expect the profitability to improve significantly. Further, the company has recently raised (in Q3FY14) Rs. 6627.3
mn through preferential allotment (Rs. 2627.3 mn) and issue of redeemable zero coupon non-convertible debentures (Rs.
4000 mn). The companys standalone debt has already reduced from Rs. 6070 mn in FY13 to Rs. 5650 mn as on Dec 31,
2013 (debt in subsidiaries is marginal). It is expected to further repay its short term loans by FY15. We expect the debt-equity
to reduce to 0.6x in FY14 and further to 0.5x in FY15. Zero coupon redeemable debentures are unlikely to result are a major
portion of companys current borrowings. Since it would not result in any recurring annual interest liability (as it is likely to be
redeemed at a premium at the end of 3 years), we expect the overall interest liability of JLL to reduce significantly from
Q4FY14 onwards, which would boost the bottomline significantly. Further, it is to be noted that JLL has surplus land parcels on
its books which, if sold, could help JLL to further reduce its debt and interest cost.

Borrowings (Rs. in Mn) DebtEquity (x)

7000 1.2
6259
6000 5660 5850
1.0 5150 1.0
5000 0.9
0.8
4000 0.6
0.6
3000 0.5
0.4
2000
691 0.2
1000 0.1
0 0.0
FY11 FY12 FY13 FY14E FY15E
Year End

Extensive distribution network

The company has a vast distribution network and strong presence in rural as well as urban areas with its products available in
2.9 mn outlets in India along with direct reach to 1 million outlets. JLL is the 10th largest FMCG company in India in terms of
distribution network. The amalgamation with Henkel has strengthened JLLs market presence. The consolidated entity
currently has 1,700 distributors in urban areas and 200 super stockists and 2,000 sub-stockists in rural areas. Such a vast
distribution network has been one of the major reasons for JLLs recent success. The company plans to increase the sub-
stockists to 2700 over the next one year to penetrate further in Tier II & Tier III cities.

Brand/geographical extensions, aggressive ad spends to drive the net sales growth (conso) over FY13-15

Led by brand & geographical expansion (partly benefited by integration of Henkel), we expect JLLs net sales to grow by
20.5% on a CAGR basis over FY13-15. Aggressive A&P spends is likely to help JLL drive its volume growth. Focus would be
mainly to dive the growth of power brands viz; Ujala, Pril, Exo, Henko, Maxo, Fa and Margo. Ujala would continue to remain
major growth catalyst for JLL going forward.

Retail Research 6
 Net Sales (Rs. in Mn) LHS % growth rate RHS
18000 47.3 50
16025.7
16000
13581.1 40
14000
12000 11041.5 30
9126.2 23.0
10000
20
8000 6194.9 21.0
18.0
6000 10
4000 3.2
0
2000
0 10
FY11 FY12 FY13 FY14E FY15E

Year End

Margins to improve on the back of restructuring initiatives

We expect JLLs consolidated operating margins to improve significantly over FY13-15 on the back of improved product mix,
reduction in trade margins and cost rationalization. OPM is estimated to improve from 11.7% in FY13 to 14.2% in FY14 and
further to 14.3% in FY15. Margin improvement in FY15 is marginal as majority of the restructuring led benefits (especially on
profit front) would flow in FY14 margins. On an absolute basis, operating profit is estimated to grow by 33.1% over FY13-15.

Operating Profit (Rs. in Mn) LHS % of sales RHS

2500 2298.4 16
14.2
12.8
11.7 1928.5 14.3 14
2000
12
9.2
1500 1296.7 10
8
1000 792.8 840.9 6
4
500
2
0 0
FY11 FY12 FY13 FY14E FY15E
Year End

PAT is expected to grow significantly by 83% over FY13-15, while PAT margins are likely to improve from 5.7% in FY13 to
9.2% in FY14 and further to 13.1% in FY15. Despite a marginal improvement expected in OPM, PAT margins are estimated to
be significantly higher in FY15, as we expect the interest cost to reduce significantly with zero coupon redeemable non
convertible debentures accounting for a major portion of companys total borrowings. Further, we expect the tax rate to be NIL
over the next two years due to accumulated losses of Jyothy Consumer. This would boost the bottomline further.

PAT (Rs. in Mn) LHS % of sales RHS

2500 13.1 14
11.1 2097.1 12
2000
9.2 10
1500 1255.2 8
4.9 5.7
1000 6
687.6
626.3 4
500 445.8
2
0 0
FY11 FY12 FY13 FY14E FY15E
Year End

Retail Research 7
Integration with Henkel a step in the right direction

In the 2011 fiscal, JLL bought 83.65% stake in Henkel India (subsidiary of the German FMCG giant) in various tranches. This
acquisition catapulted the mid-sized, mainly regional player, into the big league. It broadened JLLs product basket to include
brands like Pril, Fa, Margo, Henko, Mr. White & Chek. Henkel India's urban presence neatly balanced JLLs marked rural
stronghold. Henkels strong presence in the eastern region, where JLL has a small presence, has broadened JLLs consumer
base. Jyothy Consumer's good southern market is likely to strengthen JLLs own south presence.

In June 2012, JLL started the restructuring process with the objective to merge Jyothy Consumer with itself. This was to bring
synergies of both companies together and to improve overall profitability through cost rationalisation. Initial steps in integration
brought in fresh management for Jyothy Consumer and rationalized supply chains of both entities to lower costs. It integrated
manufacturing shrunk and merged distributor network, reduced distributor margins and tightened working-capital cycle. JLL
appointed Mr. S Raghunandan as the CEO, who recruited 15 heads of various departments with rich experience in the FMCG
sector. During the year ended March 31, 2013, JCPL was amalgamated with the company on approval by High Court of
Mumbai w.e.f. April 01, 2012. In FY12, JCPL reported Net sales of Rs. 5046.7 mn and a net loss of Rs. 408.8 mn. In 9MFY13,
the net sales stood at Rs. 2671.8 mn (down 23.6% over 9MFY12) and the company reported net loss of Rs. 331.8 mn.

We feel this is a right step taken by JLL considering the large portfolio of brands. Post integration with Henkel, JLL is likely to
benefit from new sales team, distribution integration, reduction of channel margin, and overhead optimization starting this year.
The integration is likely to yield benefits going forward. Revenues will receive a boost from the merger on a minimal equity
expansion. Further, Jyothy Consumer's accumulated losses of Rs. 3.7 bn as on FY-12 would provide tax shields to JLL from
FY14 onwards. Tax rate is likely to be NIL over FY13-15.

Laundry business to turnaround soon with focus on rationalizing and improving financial efficiency

JLL operates the countrys biggest laundry chain with 103 retail outlets through its 75.09% owned subsidiary Jyothy Fabricare
Services Limited (JFSL) [stake increased from 74.71% post acquisition of 50000 equity shares of Rs. 10 each in JFSL in
Q3FY14 from Tara India Fund IV Trust] with current Operation in Bangalore, Delhi, Mumbai, Pune, Chennai, Jaipur and
Ahmedabad. The company had started this new Value Added Service in fabric care segment to provide World class laundry
at affordable price at doorstep.

Along with acquisition of equity shares, the company also acquired 3.3 mn compulsory convertible cumulative preference
shares of Rs. 10 each in JFSL from Tara India Fund. The total consideration paid amounted to Rs. 687.3 mn. This has
resulted in Goodwill creation of Rs. 653.8 mn.

The Laundry Plant with 10 tons/day capacity at Ahmedabad, set up on BOOT model by JFSL JLL (JV) for the Western
Railways, has commenced its operation in the month of January, 2013. By adopting improvised methods, the JV has achieved
capital utilisation at 130% of its installed capacity. Further the BOOT project at Delhi International Airport is being pursued for
commencing its operation in the month of April, 2014.

During the financial year FY13, JFSL focused on rationalizing and improving financial efficiency in its operations at all levels
after its expansion drive in previous financial year 2011-12. As a result, Loss before Interest, Tax and Depreciation &
Amortization reduced by 28.24% at consolidated level and JFSL recorded a total consolidated turnover of Rs. 442.8 mn up by
16.50%, during the year under review.

JFSL recorded revenues of Rs. 300 mn & an EBITDA loss of Rs. 15-20 mn for 9MFY14. In terms of business units, Bangalore
is EBITDA positive, Mumbai achieved breakeven while Delhi continues to bleed. JFSL near-term targets include EBITDA
breakeven by Q4FY14. The company is looking to expand in Chennai and Hyderabad. For Q4FY14 & FY15, JFSL has
concrete plans for enhanced focus on retail; aligning the institutional & railway business and also concentrate to further
increase volumes of the BOOT project and thereby improve profitability.

With the increased revenue and operational efficiencies, we expect JLLs laundry business to turnaround on profit front in
FY15.

Operating Cash flows, Return ratios to improve with strong growth expected in profits

JLLs average operating cash flows over the last three years (FY10-13) stood at Rs. 612 mn. We expect this to improve
significantly with strong growth expected in profits over the next two years. We expect the company to generate operating
cash flows to Rs. 2.1 bn on an average over next two years. This would enable the company to fund majority of its expansion
plans through internal accruals.

JLLs return ratios declined from FY11 to FY13. ROCE reduced from 11.9% in FY11 to 9.4% in FY13, while ROE has declined
from 10.9% in FY11 to 3.1% in FY13. This was largely due to losses in laundry business and low margin of Henkel. However,
with successful integration of Henkel, turnaround expected in laundry business and strong growth expected in profits, we

Retail Research 8
expect a significant improvement in JLLs return ratios over the next two years. ROCE is expected to improve to 11.8% in
FY14 and further to 14.7% in FY15. ROE is estimated to improve to 13.4% in FY14 and further to 21.2% in FY15.

Good track record of enriching the shareholders wealth with healthy dividend payouts

JLL has a good track record of enriching the shareholders wealth with healthy dividend payments. The companys average
payout over the last five years (FY07-13) has been 52.5%. With improved profitability, we expect the dividend payouts to also
remain healthy over the two years (though it would decline in % terms, on an absolute basis, it would continue to improve
steadily).

Div. Amount Div. Payout

900 814.5 80
68.5
Dividend Amount (Rs. in Mn)

800 64.4 70
700 56.8 633.5

Dividend Payout (%)

60
600 42.1 50
500 403.2 415.1 50.5 40
400 30.3
290.3 38.8 30
300 201.6
200 145.1 20
100 10
0 0
FY09 FY10 FY11 FY12 FY13 FY14E FY145E
Year End

Competitive Profile

The table below gives an overview of JLLs product-wise / Brand-wise competition:

JLLs product / brand Competitor

Fabric Whitener (Ujala) HUL (Comfort Fabric, Rin Perfect
Shine)
Household Insecticide Godrej Consumer (Jet, Good Knight)
Coil (Maxo)
Household Insecticide Godrej Consumer (Good Knight), SC
Liquid (Maxo) Johnson (All Out), Reckitt Benkizer
(Mortien), Dabur (Odomos)
Utensil Care Bar (Exo) HUL (Vim), Godrej Consumer (Godrej
Dishwash),
Utensil Care Liquid (Pril) Dabur (Odopic)
Premium Detergents (Henko) Procter & Gamble India (Arial, Active
Wheel)
Popular / Economy Detergents Rohit Surfactants (Ghari Detergent)
(Check)
Ayurvedic Soaps (Margo) HUL (Hamam)
Women Deodorant (Fa) HUL (Rexona), Nivea

At CMP, JLL trades at 29.1xFY14E EPS, which is at a discount of17-25% to its peers like HUL, Godrej Consumer & P&G
India. This discount is largely on the back of JLLs smaller business size, lower profitability and return ratios compared to its
peers and lack of geographical & product diversification (47% presence in South and more dependence on Soaps &
detergents ,especially Ujala fabric whitener).

The recent restructuring exercise carried out by JLL (setting up new management team, streamlining production and
distribution, factory consolidation and steep reduction in trade margins) has started yielding results. JLLs margins have
improved significantly in 9MFY14. Along with the margin improvement, these initiatives would enable JLL to gain market share
& achieve strong growth across its power brands. Further, we feel the recent integration with Jyothy Consumer Products Ltd
(earlier Henkel India) is a step in the right direction, considering the large portfolio of brands (now JLL has 10 brands in its
kitty). The move would start yielding results in the coming months, which could translate into higher profitability. Further, debt
reduction over the next two years is likely to reduce the interest liability. This along with NIL tax rate (due to accumulated
losses of Henkel) would further boost the profitability. Thus, with the recent initiatives, we expect JLLs sales & profit growth to
be faster than its peers over the next two years. JLL trades at a discount of 46% & 42% to HUL & Godrej Consumer

Retail Research 9
respectively, valuing it on FY15E EPS. With improved profitability, we expect the dividend payouts to continue to remain
healthy. Hence we feel that JLLs discount to its peers could narrow over the next two years.

Company Name FY14E

OPM NPM EPS PE Net Sales Mkt. Cap/Sales P / BV
(%) (%) (Rs.) (x) (Rs. in Mn) (x) (x)
HUL 14.3 13.4 17.1 35.0 274445.0 4.4 30.4
Godrej Consumer 14.6 9.6 21.7 36.0 76914.4 3.2 6.3
Procter & Gamble India* 16.0 12.3 81.0 38.7 21266.8 4.9 11.0
JLL 14.2 9.2 6.9 29.1 13581.1 2.8 4.1
*June Ending. The rest are march ending (Source: HDFC sec, Consensus estimates)

Company Name FY15E

OPM NPM EPS PE Net Sales Mkt. Cap/Sales P / BV
(%) (%) (Rs.) (x) (Rs. in Mn) (x) (x)
HUL 14.1 12.9 18.4 32.5 308750.0 4.2 24.9
Godrej Consumer 15.0 10.0 26.5 29.5 90374.4 2.9 5.8
JLL 14.3 13.1 11.6 17.4 16025.7 2.3 3.7
(Source: HDFC sec estimates)

FMCG Industry Outlook

As per CII, the Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1
bn. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between
the organised and unorganised segments and low operational cost. Availability of key raw materials, cheaper labour costs and
presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from US$ 11.6
bn in 2003 to US$ 33.4 bn in 2015. Penetration level as well as per capita consumption in most product categories in India is
low, indicating untapped market potential. The rapidly growing Indian population, particularly the middle class and the rural
segments, presents an opportunity to makers of branded products to convert consumers to branded products. Growth is also
likely to come from consumer 'upgradation' in the matured product categories.

Modern Trade (MT) has a market share of 9.2% in overall FMCG sales. But MT still continues to be an urban phenomenon.
As per Nielsen, 17 key metros account for a whopping 73% of overall modern trade in India & accounted for 1/3 of the general
trade's sales in those geographies. Further, 1 in every 5 urban shoppers now frequents Modern Trade in the form of super or
hyper markets. The importance of Modern Trade would increase significantly once this format emerges in rural areas. Its
growing importance has also resulted in FMCG companies setting up sales & marketing teams dedicated only to MT. As per
Nielsen, the proportion of consumers who claim to shop at MT "occasionally" has grown from 54% last year to 66% in 2012.

The urban markets in India are poised for exponential growth in the coming years as the urban population has been
estimated to grow at about 2.3% between 2006-2016 while the overall population is anticipated to grow at an annual rate of
about 1.4%. At the same time, with about 70% of the Indian population residing in the hinterlands, the rural markets too
present a significant opportunity for business conglomerates. Rural spending was significantly higher at Rs. 3, 75, 000 crore
(US$ 69.44 billion) than urban consumption at Rs. 2, 99, 400 crore (US$ 55.44 billion) between 2009-10 and 2011-12; wherein
rural consumption per person outpaced its urban counterpart by 2 per cent, according to a study by CRISIL and preliminary
data released for 2011-12 by the National Sample Survey Organisation (NSSO).

Risks and concerns

JLLs key inputs include fatty oils, powder and perfumes, dyes and chemicals, and packing material. Most of its inputs are
linked to the price of crude and rupee depreciation. Hence sharp rise in the crude oil prices and rupee depreciation could
impact JLLs margins in case of companys inability to pass on price hikes completely to the consumers.
A sharper than expected slowdown in the Indian economy and rising inflation could slow down the consumer spending and
impact the demand for companys products (especially discretionery products in the premium categories).
Increasing competition from established players like HUL (in soaps & detergents), P&G (in detergents) and Godrej
Consumer (in Home Care) could result in pricing pressure and impact the margins. Soaps & detergents segment accounts
for 72.2% to JLLs conso revenues. Hence elevated competition there could impact the sales & profit growth significantly.
JLL is highly dependent on South India for its growth. The company derived around 48% of its revenues from South
(Kerala, Karnataka & Tamil Nadu) in FY13 (47% in 9MFY14). Any setback to the South based regions could impact JLLs
financial performance, unless it diversifies quickly in non-south regions as well.
JLLs A&P spends / Net Sales have increased from 8.3% in 9MFY13 to 10.4% in 9MFY14. Going forward, we expect the
A&P spends to continue to remain at elevated levels as JLL would continue to invest in new launches & strengthen its
existing brands (especially its power brands). Higher than expected A&P cost could keep the margins under pressure.

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Conclusion & Recommendation:

JLLs consolidated net sales are likely to grow by 20.5% over FY13-15, likely to be driven by brand and geographical
extension and aggressive marketing initiatives. The companys power brands would continue to report strong growth,
especially the flagship brand, Ujala, which would continue to be a major growth catalyst. JLL, with its business experience and
new strategies, is well placed to leverage its strength and exploit the available opportunities in the FMCG industry, which, as
per CII, is set to treble from US$ 11.6 bn in 2003 to US$ 33.4 bn in 2015. Restructuring initiatives have started to yield results
in the form of margin improvement and are expected to gradually reflect into market share gains & growth across power
brands. With focus on rationalizing and improving financial efficiency, we expect the laundry business to turnaround soon.

Post integration with Henkel, JLL is likely to benefit from new sales team, distribution integration, reduction of channel margin,
and overhead optimization starting this year. The integration is likely to yield benefits going forward. Revenues will receive a
boost from the merger on a minimal equity expansion. The management said that it is exploring inorganic growth
opportunities, mostly a regional brand, post successfully turning around Henkel after its acquisition.

OPM is likely to improve to 14.2% in FY14 & further to 14.3% in FY15 on the back of improved product mix, reduction in trade
margins and cost rationalization. Reduction in interest cost (with zero coupon redeemable non convertible debentures
accounting for a major portion of companys total borrowings), NIL tax liability (due to accumulated losses of Jyothy
Consumer) would result in significant improvement in PAT growth and margins. PAT is expected to grow significantly by 83%
over FY13-15, while PAT margins are likely to improve from 5.7% in FY13 to 9.2% in FY14 and further to 13.1% in FY15.

At CMP, JLL trades at 29.1xFY14E EPS, which is at a discount of17-25% to its peers like HUL, Godrej Consumer & P&G
India. This discount is largely on the back of JLLs smaller business size, lower profitability and return ratios compared to its
peers and lack of geographical & product diversification (47% presence in South and more dependence on Soaps &
detergents, especially Ujala fabric whitener). However, with significant improvement expected in profitability over the next two
years on the back of restructuring initiatives undertaken, we expect the discount in valuations to narrow. We expect JLLs
sales & profit growth to be faster than its peers over the next two years. JLL trades at a discount of 46% & 42% to HUL &
Godrej Consumer respectively, valuing it on FY15E EPS. Improved profits could result in higher dividend payouts and improve
the valuations further.

Valuing the stock at 20xFY15E EPS, we arrive at a price target of Rs. 232. We feel investors could buy this stock at the
current levels and average it on dips in the price band of Rs. 174-185 (15-16xFY15E EPS) for our price target over the next
one to two quarters.

Quarterly Financial Performance: (Standalone)

Particulars (Rs. in Mn) Q3FY14 Q3FY13 VAR [%] Q2FY14 VAR [%] Q1FY14 Q4FY13
Net Sales 2969.9 2342.1 26.8 3085.5 -3.7 3181.9 2721.2
Other Operating Income 4.4 3.8 15.5 1.7 154.3 9.6 4.0
Total Income 2974.3 2345.9 26.8 3087.3 -3.7 3191.5 2725.2
Total Expenditure 2550.3 1982.3 28.6 2660.7 -4.1 2705.4 2387.4
Raw Material Consumed 878.2 643.5 36.5 708.1 24.0 889.1 894.1
Stock Adjustment -112.4 -130.9 - 40.4 - 55.8 -41.0
Purchase of Finished Goods 806.6 692.2 16.5 876.5 -8.0 736.2 700.6
Employee Expenses 287.8 287.2 0.2 285.6 0.8 304.9 229.9
Advertisement & Sales Promotion 274.8 160.1 71.6 296.0 -7.2 386.8 218.0
Other Expenses 415.3 330.2 25.8 454.1 -8.5 332.6 385.9
Operating Profit 424.0 363.5 16.6 426.6 -0.6 486.2 337.8
Other Income 150.1 128.6 16.7 117.8 27.4 119.3 113.1
PBIDT 574.1 492.2 16.6 544.4 5.5 605.4 450.9
Interest 144.7 171.9 -15.9 179.3 -19.3 166.6 175.1
PBDT 429.4 320.3 34.1 365.1 17.6 438.8 275.8
Depreciation 155.7 152.4 2.1 154.5 0.8 151.8 157.6
PBT 273.8 167.9 63.1 210.6 30.0 287.0 118.2
Tax (including DT & FBT) 0.0 0.0 - 1.9 -100.0 0.0 0.0
Reported Profit After Tax 273.8 167.9 63.1 208.7 31.2 287.0 118.2
Extra-ordinary Items 0.0 0.0 - -13.5 -100.0 -9.3 0.0
Adjusted PAT 273.8 167.9 63.1 222.2 23.2 296.3 118.2
EPS (Rs.) 1.5 1.0 45.3 1.3 13.0 1.8 0.7
Equity 181.0 161.3 12.3 166.0 9.0 166.0 161.3
FV 1 1 0.0 1 0.0 1 1

Retail Research 11
 OPM (%) 14.3 15.5 -8.0 13.8 3.3 15.3 12.4
PATM (%) 9.2 7.2 28.6 7.2 28.0 9.3 4.3
(Source: Company, HDFC Sec)

Quarterly Segmental Performance: (Standalone)

Particulars (Rs. in Mn) Q3FY14 Q3FY13 VAR [%] Q2FY14 VAR [%] Q1FY14 Q4FY13
Segment Revenue 3007.1 2342.1 28.4 3121.5 -3.7 3195.7 2721.2
Soaps and Detergent 2403.9 1872.2 28.4 2301.6 4.4 2534.5 1723.5
Home Care 563.8 447.8 25.9 776.1 -27.3 582.7 839.3
Others 39.4 22.1 78.1 43.9 -10.4 78.5 158.4
Less : Inter Segment Revenues 37.2 0.0 - 36.0 3.5 13.8 0.0
Total Segment Revenue 2969.9 2342.1 26.8 3085.5 -3.7 3181.9 2721.2

PBIT 333.4 272.9 22.2 342.6 -2.7 398.7 238.6

Soaps and Detergent 301.7 234.2 28.8 321.1 -6.0 390.2 210.6
Home Care 34.7 44.5 -22.0 20.8 66.8 35.7 20.0
Others -3.0 -5.8 - 0.7 - -27.3 8.0
Less : Interest 144.7 171.9 -15.9 179.3 -19.3 166.6 175.1
Other Un-allocable Expenditure 64.6 60.6 6.6 69.0 -6.4 63.4 62.3
Other Un-allocable Income/Except 149.6 127.5 17.4 116.3 28.6 118.2 116.9
Item
Net Profit/Loss Before Tax 273.8 167.8 63.1 210.6 30.0 287.0 118.2

PBITM (%) 11.1 11.7 -57 bps 11.0 11 bps 12.5 8.8
Soaps and Detergent 12.5 12.5 4 bps 13.9 -140 bps 15.4 12.2
Home Care 6.2 9.9 -378 bps 2.7 348 bps 6.1 2.4
Others -7.6 -26.2 - 1.5 - -34.7 5.1

Capital Employed in Segment

Soaps and Detergent 5795.2 5594.3 3.6 5910.2 -1.9 5569.0 5563.3
Home Care 1051.2 1088.4 -3.4 790.4 33.0 957.1 866.6
Others 287.0 250.9 14.4 301.6 -4.8 285.4 282.9
Total Capital Employed 7133.4 6933.5 2.9 7002.1 1.9 6811.5 6712.8
Add : Unallocable Assets Less 3278.7 674.1 386.4 733.8 346.8 715.8 527.4
Liabilities
Total Capital Employed 10412.1 7607.6 36.9 7735.9 34.6 7527.2 7240.2
(Source: Company, HDFC Sec)

Financial Estimations: (Consolidated)

Profit & Loss A/c

YE March (Rs. Mn.) FY11 FY12 FY13 FY14E FY15E

Net Sales 6194.9 9126.2 11041.5 13581.1 16025.7
Other Operating Income 68.9 3.8 18.1 40.7 46.8
Total Operating Income 6263.8 9130.0 11059.6 13621.8 16072.5
Material Cost 3202.8 5029.9 5843.6 6872.0 8173.1
Employee Benefits Expense 813.1 1136.7 1304.8 1412.4 1642.6
Conversion & Other Related charges 0.0 0.0 0.0 0.0 0.0
Advertisement & Sales Promotion 556.5 695.2 955.4 1426.0 1714.7
Other Expenditure 898.7 1427.4 1659.2 1982.8 2243.6
Total Operating Expenses 5471.0 8289.1 9762.9 11693.3 13774.1
Operating Profit 792.8 840.9 1296.7 1928.5 2298.4
Other Income 169.1 227.3 52.0 109.2 167.9

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 EBITDA 961.9 1068.3 1348.7 2037.7 2466.3
Interest 19.9 238.3 682.2 560.3 114.0
Depreciation 130.3 246.5 224.3 234.6 253.1
PBT 811.7 583.4 442.2 1242.8 2099.2
Tax (including FBT & DT) 154.3 199.3 -148.7 0.0 0.0
PAT (before minority interest and profit / loss from Assc) 657.4 384.1 590.9 1242.8 2099.2
Minority Interest; Profit / Loss from Assc. -30.3 -61.7 -35.4 -12.4 2.1
PAT (net of minority interest, Profit / Loss from Assc) 687.6 445.8 626.3 1255.2 2097.1
Extra-ord Items 0.0 0.0 429.8 0.0 0.0
Adjusted PAT 687.6 445.8 196.5 1255.2 2097.1
(Source: Company, HDFC Sec Estimates)

Yearly Balance Sheet

YE March (Rs. Mn.) FY11 FY12 FY13 FY14E FY15E

Equity & Liabilities
Shareholders Funds 6311.1 6124.2 6385.5 9366.8 9888.2
Share Capital 80.6 80.6 161.3 181.0 181.0
Warrant Allotment 0.0 0.0 0.0 0.0 0.0
Reserves & Surplus 6230.4 6043.6 6224.2 9185.8 9707.2
Capital subsidy 0.0 0.0 0.0 0.0 0.0

Non-Current Liabilities 336.6 4717.4 4428.2 5705.6 6185.5

Minority Interest 4.8 66.9 48.8 36.4 38.5
Long Term borrowings 77.5 4379.4 4250.0 5350.0 5150.0
Deferred Tax Liabilities (Net) 163.2 161.0 9.1 10.0 11.1
Other Long Term Liabilities 43.5 27.0 18.0 21.6 24.8
Long Term Provisions 47.6 83.1 102.2 287.6 961.1

Current Liabilities 1672.8 3351.7 4378.8 4218.2 4283.8

Short Term Borrowings 583.1 1236.7 1267.8 500.0 0.0
Trade Payables 418.8 1545.1 1234.8 1494.1 1748.1
Other Current Liabilities 158.4 282.7 1109.1 1342.0 1543.3
Short Term Provisions 512.5 287.2 767.0 882.1 992.4

Total Equity & Liabilities 8320.4 14193.4 15192.5 19290.7 20357.4

Assets
Non-Current Assets 3500.7 10905.0 11707.3 12597.8 12725.5
Fixed Assets 2516.2 10333.6 10696.7 11373.2 11299.1
Gross Block (Tangibles) 2900.5 4529.9 4637.3 4887.3 5062.3
Depreciation, Amotisation & Impairment 643.0 1319.9 1641.3 1875.9 2129.0
Net Block (Tangible Assets) 2257.4 3210.1 2996.0 3011.4 2933.3
Intangible Assets 133.0 7092.7 7627.7 7627.7 7627.7
Capital Work-in-Progress 125.7 30.9 73.0 80.3 84.3
Goodwill On Consolidation 0.0 0.0 0.0 653.8 653.8
Non Current Investments 622.2 15.0 15.0 15.0 15.0
Long -term Loans and Advances 349.6 537.8 979.9 1195.4 1398.7
Other Non-Current Assets 12.9 18.6 15.7 14.1 12.7

Current Assets 4819.6 3288.4 3485.2 6692.9 7632.0

Current Investments 0.0 0.0 0.0 2280.0 2451.0
Inventories 694.0 1219.8 1721.7 2117.7 2498.9
Trade Receivables 1053.5 807.2 807.9 993.7 1172.5

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 Cash & Cash Equivalents 2795.9 662.2 463.1 697.3 796.8
Short Term Loans & Advances 252.6 556.2 443.3 545.2 643.4
Other Current Assets 23.6 42.9 49.2 59.1 69.4

Total Assets 8320.4 14193.4 15192.5 19290.7 20357.4

(Source: Company, HDFC Sec Estimates)

Key Ratios

YE March FY11 FY12 FY13 FY14E FY15E

FD EPS (Rs.) 4.3 2.8 3.9 6.9 11.6
PE (x) 47.3 72.9 51.9 29.1 17.4
Book Value (Rs.) 39.1 38.0 39.6 51.8 54.6
P/BV (x) 5.2 5.3 5.1 3.9 3.7
OPM (%) 12.8 9.2 11.7 14.2 14.3
PBT (%) 13.1 6.4 4.0 9.2 13.1
NPM (%) 11.1 4.9 5.7 9.2 13.1
ROCE (%) 11.9 7.0 9.4 11.8 14.7
RONW (%) 10.9 7.3 3.1 13.4 21.2
Debt-Equity (x) 0.1 0.9 1.0 0.6 0.5
Current Ratio (x) 2.9 1.0 0.8 1.6 1.8
Mkt. Cap/Sales (x) 5.2 3.6 2.9 2.7 2.3
EV/EBITDA (x) 31.6 35.1 27.8 19.3 15.6
(Source: Company, HDFC Sec Estimates)

Cash Flow Statement

(Rs. In Million)
YE March FY11 FY12 FY13 FY14E FY15E
Profit Before Tax 811.7 583.4 442.2 1242.8 2099.2
Net Opt Cash Flow -118.9 1245.8 277.9 1952.3 2364.3
Net Cash from Investing Activities -1526.7 -6151.2 -282.6 -3405.1 -551.8
Net Cash from Financing Activities 2446.2 4132.3 -239.3 1686.9 -1713.0
Cash & Cash Equivalents 2795.9 662.2 463.1 697.3 796.8
Net Inc/(Dec) in Cash 800.6 -773.1 -244.0 234.1 99.5
(Source: Company, HDFC Sec Estimates)

Analyst: Mehernosh Panthaki - FMCG, IT & Midcaps

Email ID: mehernosh.panthaki@hdfcsec.com)

RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves,
Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email:
hdfcsecretailresearch@hdfcsec.com

Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation.
This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a
solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or
complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities
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document. This report is intended for non-Institutional Clients

Retail Research 14