JHS benefits from capacity ramp up

Q3 review: JHS benefits from capacity ramp up, Dabur sees well-diversified performance

We are encouraged with demand pick up in rural market. Sales growth through Dabur's Super stockist channel, which is largely rural, was 26% YoY and augurs well for a company having sales contribution of about 45-50% from rural areas.

JHS Svendgaard, reported an encouraging set of results driven by commissioning of new capacity and better sales offtake at its key clients end, Patanjali and Dabur. While we took note of company’s capacity expansion updates, it’s near-term sales guidance, in particular, adds to our conviction for the stock.
Dabur, too, posted a spectacular result, beyond oralcare. Double digit growth in most of the product categories and higher rural growth (vs. urban growth) were the key takeaways.


JHS Q3 2018: guided by improved volume offtake

JHS Q3 FY18 results witnessed 40% QoQ (93% YoY) growth in net sales driven by operationalization of new capacity and enhanced contracts from the clients. Gross margin improved sequentially but declined on YoY basis. EBITDA margin, as well, improved sequentially but expansion was lower due to higher employee cost and other expenses. Further, margins were also impacted by the cost related to their own brand, where in its manufacturing is likely to scale up in the current quarter.

New capacity commissioned in Q2 FY 2018

It is noteworthy that company has commissioned its toothpaste manufacturing capacity to 175 million tubes (from 90 million tubes) which is now aligned with its manufacturing cum packaging capacity of 28,000 TPA.

Management expects 25% growth in FY19

Management seems upbeat on the utilization of current capacity both in terms of order book from the clients and as well as plan to manufacture own brand products.

Currently, own brand products constitute 10% of sales which is likely to scale up from current quarter (Q4FY18). Management expects 25% growth in both topline and bottom-line for FY19.

Reasonable valuation

Results have been largely in-line with our expectations prompting minor tweaks in our projections. We are encouraged by the sequential jump in the topline numbers guided by the new capacity expansion and expect incremental increase in capacity utilization.

Stock is currently trading at 16.3x (2019E earnings) which is at a discount to the industry average. Further, in light of 42% CAGR for the operating profit for the period 2017-19E, valuation appears attractive, in our view. Recent dip in stock prices provides an interesting entry opportunity for the investors.

Further, Q3 results of its key client Dabur has consistently been robust in the oral care category (Q3FY18: 26% YoY sales growth in toothpaste) which lends credence to the growth story of JHS.

Dabur Quarterly update:

Dabur’s reported consolidated revenue for Q3FY18 increased by 6.1 percent YoY, while the underlying constant currency growth (adjusted for GST accounting) was up 12.9 percent. Indian business (74 percent of Q3 FY18 sales) was up 17.7 percent YoY mainly aided by 13 percent volume growth. International business grew by 5 percent on constant currency basis. India business EBITDA margins improved on YoY terms but contracted on QoQ terms due to pick up in ad spends partially offset by lower raw material cost.

Well diversified performance

In terms of product categories, there was double digit performance from all except OTC and Food.

In fact, growth in Food segment (14% of sales) was flat partially due to high base effect. But the main impact resulted from the shift in festival season and competition from the mid-sized value players like hector bioscience.

Health supplements (24% of sales) vertical benefitted from strong growth in Chyawanprash (+12.2% YoY) and Honey (+33.2%). Although, it’s happening on weak base, but market share gains in honey segment underlines claw back of position in the market. Home care, relatively, smaller segment witnessed good growth for Sanifresh and Odonil partially offset by weak numbers for Odomos (lower mosquito related diseases).

Oral care, particularly tooth paste category, continue to deliver. While strong growth in south continues, there has also been market share gain in states like UP, where it had earlier lost some ground.

Focus on domestic business

In the Food segment, company garners high margins and is ready to sacrifice some and meet competition on the pricing front. However, on the overall pricing front, company is in a wait and watch mode as the Oil derivative prices have surged and at some point price hikes may be warranted.

In case of international business, GCC markets have witnessed turnaround but North African, Turkey markets were weak. Consequently, ad spend in international markets have still not picked up, in contrast to the domestic market. So in near term, focus is on the domestic market recovery.

Outlook

Overall, we are encouraged with demand pick up in rural market. Sales growth through Super stockist channel, which is largely rural, was 26 percent YoY and augurs well for a company having sales contribution of about 45-50 percent from rural areas. Secondly, the company is able to gain better traction in competitive segments like oralcare and honey.

Thus, reducing competitive intensity, higher new product roll out, demand pick up and calibrated product-wise strategy, make us remain constructive on the stock (38x 2019e earnings vs. market leader HUL’s 49x 2019e earnings).

Happy investing

Source:Moneycontrol.com

7 things you should start the new financial year with

It is July (April) again: 7 things you should have started the new financial year with

Our lifestyle is not static, it evolves over time. Our income is one of the main determinants and our aspirations further influence it.

March ending pressure kills the possibility of any celebrations of Fool’s day that falls on April 1. Most of us breath a sigh of relief as we go past April 1 saying – "Finally, March ending is here." In such a situation, who would celebrate the new financial year? Keep aside the celebrations of a new year, the beginning of a financial year warrants a re-look at your money matters. Here are 7 money moves you should make at this juncture.


Budget it right


Our lifestyle is not static, it evolves from time to time. Our income is one of the main determinants and our aspirations further influence it. But that does not mean that you should lose sight of savings. It must follow the ‘Earn-Save-Spend’ norm that should be followed by you.


Once you decide on your level of savings per month, you should curtail your spending. For that you should first know where you are spending. Write down your spending and identify patterns. This budgeting exercise should help you strike the right balance.

Initiate smart spending

Cutting down spending is not a welcome idea. Hence it is better to go for smart spending. Use apps, credit cards and loyalty programmes that help you pocket a few discounts on your needs. Also unsubscribe from all subscriptions that may induce spending on wants.

Try to cut your spending each month compared to previous month or the same month the previous year. If you compete with yourself there is a high possibility that you will emerge a smarter spender.

If you succeed with your spending goals, and if you get a good raise in your job, the savings simply leap in no time.

Target debts

Beginning of the year is a good time to take stock of your loans. You can check the interest rates payable on them and the prepayment charges if any. Target high cost loans first, irrespective of the loan amount. Home loans come with tax benefits and lower interest rates compared to high cost personal loans. Hence even if a personal loan does ask for prepayment fees, do try to close them as soon as possible.

Such foreclosure of loans help you save money on account of interest you would have paid on the loan. If you study the real devils in your liabilities, you can attack them better.

Set your goals

Write down your aspirations in the form of financial goals. For example, you may want to buy a car priced at Rs 7 lakh three years from now. The financial goals must be expressed in money terms and must be time bound.

You should ideally be defining both your short term goals as well as long term goals.

Make a strategy

Setting your financial goals will also call for deciding on a game plan for achieving it. For short term goals, start saving money in less risky investment avenues such as fixed deposits, recurring deposits and bond funds.

If you are keen on saving for a long term financial goal such as retirement, do embrace risky investment options such as stocks as they are expected to beat inflation by a major margin in the long term. If you do not understand stock selection, opt for investing in equity mutual funds and balanced funds through systematic investment plan.

Plan your taxes

If you have avoided tax planning until the last moment of the past financial year, you better start your financial year with tax planning. Initiating your tax planning exercise in the light of your financial goals, will put you on the front foot. For example, if you have a long term goal of retirement, you can choose investment options such as tax-saving funds or Public Provident Fund (PPF) among others. If you have a medium term financial goal, then you can go for tax-saving bank fixed deposits.

Buying term life insurance and health insurance can be extremely helpful in the long term, as both of them protect you financially and bring in much needed tax breaks.

Kill that procrastination

If you think that these six points can improve your money matters, it is high time you act on them. Procrastination kills the best of the financial plans. If you start now, you will have more time as compared to a year from now. More time on hand not only makes it less pressurising, but lets you take corrective action wherever required.

To put it straight, make a plan and start walking towards the goal of financial freedom.

Happy Investing

Source:Moneycontrol.com