JLL launched 100% natural and chemicals free incense stick Maxo Agarbatti in Q2FY19. The mosquito repellent incense stick category has posted 101% revenue CAGR in last three years with a size of Rs 385 crore (YTD CY18).
The market currently consists of hundreds of local brands of which many are illegal/unorganised and use harmful pesticides. With high growth and huge popularity being witnessed in this segment, we believe JLL has made the right move to capture the opportunity by foraying into this category. JLL is also looking to extend its heritage brand Margo to facewash and handwash segments.
In addition to new launches, JLL is eyeing an acquisition in FY20 to the tune of Rs 1,000 crore to achieve its target of reaching Rs 4,000 crore topline by FY21. JLL’s planned expansion in the haircare segment in the Ayurveda space is expected to enhance its revenue from the personal care segment in the foreseeable future.
Flagship brands contribute 87% of FY18 sales, growing at 11% CAGR in the last five years.
JLL has directed its focus primarily to power brands in a bid to improve visibility and aid brand recall. JLL is investing in advertising and promotional activities to market these power brands and maintain its growth rate in coming years. The company has been able to diversify Margo from its erstwhile traditional core markets, which now contributes only 30%. It has been able to reduce its debt over the years thereby resulting in net profit CAGR of 28.5%.
JLL has expanded its distribution network with its total number of outlets growing 7x from 0.4 million outlets in FY14 to 2.8 million outlets in FY18 across the country. With its brand building strategies, effective distribution network and operational efficiencies, we estimate JLL’s margins for FY19E, FY20E, FY21E at 16.1%, 16.3%, 17.1%, respectively.
We expect revenue CAGR of 10.5% for FY18-21E. The long-term growth story of the company on account of an increase in penetration and premiumisation remains intact.