We met the top management of Jyothy Laboratories and expect FY14 to be a year of increased aggression on sales. We believe that the full force of the combined entity should start reflecting in financials from FY15E. Retain ?add?.
The management highlighted that overall macro slowdown has had relatively lower impact on JYL due to lower base vs peers across brands and recent growth initiatives like distribution rationalisation, higher brand investments and a spate of re-launches.
JYL maintained its guidance of ~20-25% revenue growth for FY14E. In terms of focus, management was quick to highlight that revenue growth remains a bigger priority versus margin gains.
While JYL?s overall portfolio includes 10+ brands (after Henkel acquisition), its core focus remains on seven power brands ? Ujala, Henko, Maxo, Exo, Margo, Pril and Fa. Further, it is essentially focusing on three core themes to drive growth ? growing regional brands into national brands, growth via brand extensions/re-launches and higher brand investments.
JYL maintained its margin guidance of ~14-15% OPM for FY14E and ~200-300-bps expansion y-o-y. Over the longer term, it is looking to increase its focus on premiumisation to drive sustained margin expansion and its rising focus on premium (higher gross margin) brands like Henko (focus on premium detergents), Ujala Whitener (new packaging launched), extensions in Margo and liquids in household insecticides (under Maxo brand) are steps in this direction. While pricing is not a strong focus, management highlighted that recent rupee depreciation remains a concern.