Category: Business Analysis
Sector : Fast Moving Consumer Goods, Industry : Household and Personal Products
Business Overview:
From a small business, manufacturing and selling a single product from a shed in Thrissur, Kerala since 1983, the Company has grown into a Pan-India multi-brand business with 23 manufacturing units and today they are leader in various categories. Mr. M. P. Ramachandran is founder of Jyothy Labs. Company is strengthening its portfolio by acquiring renowned brands.
Brands:
- Fabric Care (29% growth)
- Ujala since 1983 ( #1 since its launch) – Whitener (84% market share), Liquid Detergent
- Henko since 1994 – Liquid Detergent and Powder
- Mr. White and More Light Detergent powder
- Dishwash (8.4% growth)
- Exo since 2000 (#2 by value) – Dish wash Bar (13.8% market share) and Gel
- Pril since 1999 (#2 by value) – Dish wash liquid (14.8% market share) and Bar
- Home care
- Maxo since 2000 (#2 by volume) – Mosquito repellent coil (23.1% market share) and Maxo Machine with Liquid vaporiser (8.9% market share)
- T-Shine since 2018 – Toilet specialist organic toilet cleaner
- Maya Agarbathi
- Personal Care:
- Margo since 1920 – Soap, Hand Wash, Face Wash and sanitizer
- Neem Active – Tooth paste
- Fa Deodorant, Fa After Shave, Fa Talc
- Laundry services: Fabric Spa
Brand Image from Annual Report 2023
Business Presence and Plants:
- Company have 23 manufacturing plants in diverse location within India to ensure good supply chain and have one plant outside India
- 2.8 Million Outlets in Pan India, 1.1 Million Direct Reach and 8200+ channel partners
- Domestic contribution to revenue is 97.4% and exports revenue contributes 2.6%
- Company have Jyothy Kallol Bangladesh Limited with 75% share in it
- As per Annual Report 2020, they have focus to expand outside India such as the Middle East, Malaysia, Bangladesh and Sri Lanka.
Business Acquisition in the past:
- Acquired Pril in 2011
- Acquired Henko in 2011
- Margo launched in 1920 acquired in 2011
Industry Market Size Overview:
- Fabric wash and care market valued at USD 4763 Million and expected to grow at 5.64% up to 2029 (Rs.39000 Cr.). Source: techsciresearch
- Bath Soap Market valued at USD 3063 Million (Rs. 25000 Cr.) and expected to grow at CAGR of 5.58% up to 2032. Source: IMARC group
- Dishwashing Detergent market expected at USD 900 Million (Rs. 7500 Cr.) and expected to grow at 4.42% up to 2028. Source: Statista
- The India Household Insecticide Market size is estimated at 6000 Cr. Source: Annual Report Jyothy Labs
Jyothy Labs Revenue in Different Segments: As of 2023
- Fabric Care (42% of revenue) – Rs. 1056 Cr.
- Dishwashing (35% of revenue) – Rs. 865 Cr.
- Household Insecticides (8.5% of revenue) – Rs. 211 Cr
- Personal Care (10% of revenue) – Rs. 254 Cr.
- Laundry Services (2% of revenue) – Rs. 49 Cr.
- Others (2% of revenue) – Rs. 49 Cr.
Financial Statements Overview:
Past 10 years Financial Analysis: From 2014 to 2023 (Amount INR Crores)
Image from Screener Excel
- Company sales dropped only twice in past 10 years which is less than 6%, sales increased from 1323 Cr. to 2714 Cr. at CAGR of 7.25%, in recent years company sales growing at 13%
- Operating Profit Margin stands at 13% which looks cyclical in the range of 11% to 16%, this shows less pricing power of company shifting to customers
- Company depreciating its assets at 4% and Interest rates decreasing steadily from 55 Cr. to 6.5 Cr., this is good sign and shows company reducing its debt level and now its is Net-Debt Free. Company paying tax at the rate of 20%.
- Net profit increased from 81 Cr. to 240 Cr. in 10 years at CAGR of 13%. Net Profit Margin stands at 10% which was varying in the range of 5% to 11%
- Free Cash Flow improved from 106 Cr. to 293 Cr. in 10 years at CAGR of 12%. Capital Expenditure was stable in past 10 years, this is very good for generating good free cash flow.
- Net Fixed Assets Turnover improved from 1.2 to 2.2, Inventory Turnover look stable around 8.3 and maintaining stable working capital days at 65 days compared to the past.
Past 20 years Company Financial Data for Reference: From 2002 to 2023
- 20 Years Sales and EBITDA CAGR at 11% and PAT CAGR at 12%, this value is safe to consider for business valuation for long-run.
- Gross Profit Margin maintained above 40%
- Company spending 7% of its revenue in Advertisement and Promotion Expense which is reduced compared to past data of 20%
- Company having 283 Cr. cash in its book which will be used for the future business acquisition
Segment Wise Revenue Contribution Data for 15 years: From 2008 to 2023
- Company have good growth in Fabric Care and Dishwashing segment which is still major contributor for revenue
- Personal Care shows moderate growth in past 10 years and Laundry services at 2% and Others at 6%
- Household Insecticides shows flat revenue in past 10 years
Management Overview:
Board of Directors and Executives:
- M P Ramachandran – Chairman Emeritus
- M R Jyothy – Managing Director (daughter of M R Ramachandran)
- Ananth Rao T – Director Operations and Commercial
- Ravi Razdan – Director IT and HR
- Bhumika Batra – Independent Director
- Aditya Sapru – Independent Director
- Subramaniam Narayanan – Independent Director
- Suresh Balakrishna – Independent Director
In 2023, M R Deepthi (daughter of M R Ramachandran) resigned from director and employee of the company. Also, R Lakshminarayanan and Nilesh B Mehta retired as Independent Directors of the Company on Mar 31st, 2024.
Directors and Key Persons Remuneration: As of 2023
Management about Business: MD interview in Weekender CNBC TV18
- Management interested in focusing more on personal care segment looking for revenue contribution to 15 to 20% from 10% and overall sales will be in double digit in terms of %.
- Advertisement spend will reach the double digit in term of %.
- Next milestone in sales for 5000 Cr. will not take another 5 years
- In Dishwash segment based on Market Share, Jyothy Labs is in #2 position, the gap between leader and Jyothy is wide so planning to narrow the gap1
- Company is currently waiting for opportunity to utilize the cash in book and focusing on opportunity where they can use current distribution and plants. The key segment will Personal Care but not limited.
- Adding 50 to 80 thousand outlets every year to reach customers
- More Optimistic on Margo, Exo and entire Fabric Care.
Conference Call Analysis: From Feb 2024
- In Dec 2023 Quarter, Fabric Care grown by 11.9%, Dishwash by 6.7%, Household Insecticide Category by 5.4%, Personal Care by 22.3%
- Under Personal Care Segment, Neem based Margo soaps introduced with new variants rose, lemon, jasmine have good acceptance with customer.
- Company focusing on more on investing in direct distribution, other than TV spends focusing more on ground operation like van to reach rural areas and finally new product development.
- Company able to achieve 5000 Cr. sales by next 4 years
- Currently Household insecticides making loss which will come to profit once Liquid Vaporiser market increases.
- Fabric care main growth is due to penetration in low presence states and Ujala detergent spreading out of Kerala.
- Company haven’t seen hike in raw material prices mainly LABSA (Linear Alkyl Benzene Sulphonic Acid), Soda Ash, Palm Oil.
Business Valuation:
- Considering the business will grow same as previous years of operating history at CAGR of 11%, Price to Earnings 30 2 as conservative value and terminal growth value around 3%.
- Based on Future Cash Flow Terminal and Exit Model, the business valuation will be in the range of 7900 Cr. and 11800 Cr.3
- Valuation will vary based on different assumption and expectations.
Footnotes:
- Vim from Leader HUL have close to 50% market share reaching the revenue of 2000 Cr. ↩︎
- Good Assumption is 20PE for very good business. Since it’s presence in FMCG, I took median PE around 30 ↩︎
- I will post formula’s to calculate business value in coming posts under basics of stock investing category ↩︎
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