Consolidated net sales rose 3.3% y-o-y to Rs 3.83b (Ind-AS; estimate of +1% y-o-y to R3.76b). Overall volumes grew 3.6% y-o-y. Power brand sales rose 2.1% y-o-y, with 2.6% volume growth. EBITDA declined 1.3% y-o-y to Rs 507m (estimate of -10% y-o-y to Rs 468m). PAT grew 6.6% y-o-y to Rs 215m (estimate of 218m).
Consolidated gross margin contracted 290bp y-o-y to 45.6% (estimate of 47.4%), as higher crude prices led to increased costs. However, savings on staff costs (-50bp y-o-y) and lower A&P (-110bp y-o-y)/other expenses (-70bp y-o-y) restricted consolidated EBITDA margin contraction to 60bp y-o-y to 13.2% (estimate of 12.4%).
JYL exhibited reasonable resilience in volume growth, especially in a tough business environment post demonetisation. However, valuations are fair at 38.4x FY18 EPS and 22.4x FY18 EV/EBITDA. Upside on our target price of Rs 364 (22x December 2018 EBITDA) is limited. Potential speculation around Henkel call option will overshadow the underlying fundamentals in the near term, in our view. North and East business still remains challenging. Wholesale is much larger part in these regions Wholesale channel for Jyothy is 40% of sales. In November wholesale channel sales were nearly zero after 8th November. In December wholesale channel 75% back to Normal in South and East. In North and East they will be at 50% of Normal. East is a particular problem. Management believes demand will come back.