Reported power brand sales grew just 9.3% y-o-y. EBITDA rose 36.8% y-o-y to Rs 69.3 crore (est of Rs 61 crore). Adj PAT after non-controlling interest (NCI) grew 61.5% y-o-y to Rs 34.7 croe (est. of Rs 34.7 crore). Fabric care, Dishwashing and Personal care grew 9%, 12.4% and 30.9%, respectively, while Household Insecticides fell 17.1% y-o-y. Other expenses declined by 80bp y-o-y, while staff costs and A&P rose 10bp and 50bp, respectively. Thus, consolidated EBITDA margin expanded 290bp y-o-y to 16.1%. (1) Management reiterated positive rural growth outlook stated by them in the 2QFY18 call. (2) Volume growth of 8-10% is sustainable for JYL, going forward. (3) Wholesale trade has largely stabilized; only some parts of UP, Bihar and West Bengal are seeing some wholesale trade pressure.
Changes to the model have not resulted in material changes in FY18/FY19/FY20E EPS. Pace of earnings growth (for FY17-20E) appears moderate for a company that is much smaller in terms of size compared to mid-cap peers. RoE is also at a discount to peers at 18% and 21.7% for FY19E and FY20E, respectively. Given these worries, valuation of 21.8x FY19E EV/ EBITDA and 33.8x FY19E EPS does not offer scope for a significant upside. Targeting 20x Dec’19E EV/ EBITDA (20% discount to staples peers’ average), we get a TP of Rs 380 (R375 earlier). Maintain ‘Neutral’.
