HDFC Bank Investment Advisory May 6, 2010

Jyothy Laboratories Ltd. Market Out Performer

Key Details
CMP (Rs.) 178 Shareholding Pattern (%) as on 31st Dec 2009
52 Week H/L (Rs.) 205 / 61 Foreign 3.81
Market Cap (Rs. mn) 12980 Institutions 17.81
Book Value (Rs.) 55.82 Promoter 70.13
Face Value (Rs.) 1 Non Promoter Corporate Holding 1.92
Dividend Yield (%) 1.1 Public & Others 6.32
P/E (TTM) 17.4

Company Background
Jyothy Laboratories Ltd. (JLL) is a mid-sized
Revenue Base (FY09)
FMCG company known for its flagship brand,
Ujala, the liquid whitener that rules the market 7% Fabric Care
with 73.6% market share (Apr 09). Started in
1983, the company has grown by way of 17% Mosquito
diversification across geographies and product 39%
Repellant
portfolio. The company has 2 main heads of
operations: Soaps & Detergents and Home Care. Dishwashing
Soaps & Detergents segment includes fabric
whitener, fabric detergent, dish wash bar and
Other
soaps while the Home care segment includes 37%
Products
mosquito coils, scrubber and incense sticks.
The company has 21 manufacturing facilities in
14 locations across India. Besides, a strong presence in the domestic market, the company also
exports to 14 countries including Sri Lanka, Bangladesh, Mauritius, Malaysia, UAE, Hong Kong and
Saudi Arabia.
Financial Performance over FY07-FY09
Particulars (Rs. mn) 9MFY10 FY09* FY08 FY07
Net Sales 3835.8 3619.1 3762.5 3594.4
YoY Growth - - 4.7%
Operating Profit 642.5 494.7 616.1 541.1
OPM 16.75% 13.64% 16.35% 15.05%
Net Profit 529.4 383.6 451.4 490.2
YoY Growth - - -7.9%
NPM 13.80% 10.60% 12.00% 13.64%
*Company has c hanged the financial year to Apr-Mar from July-June. So, FY09 figures are for 9 months

Key Investment Points across Business Segments

§ Robust Product portfolio with mass appeal: Ujala Fabric Whitener has established itself as
a household name on the back if the inherent strength of quality and affordability. As per the
IMRB’s Household Panel Data estimates, Ujala was purchased by 75.4 mn households
representing 37% households. The company has leveraged this brand equity to introduce other
fabric care products – Ujala Detergents and Stiff and Shine.
The other established business lines include Maxo Mosquito Repellent and Exo surface
cleaner. The latest foray into the Fabric care services sector (Fabric Spa) through organised
laundry holds good potential.
The non Ujala portfolio has formed over 60% of revenues in FY09. This reflects the
management’s success in creating brands, thus de-risking its business model.

This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable, HDFC Bank
Limited("HDFC Bank") does not warrant its completeness and accuracy. Whilst we are not soliciting any action based upon this information, all care has been taken
to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sale of any
financial instrument Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its
employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the
information contained in this material.
HDFC Bank and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have
long or short positions in, and buy or sell the securities thereof, of company(ies) mentioned herein. HDFC Bank may at any time solicit or provide commercial
banking, credit, advisory or other services to the issuer of any security referred to herein. Accordingly, information may be available to HDFC Bank, which is not
reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication.
HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Phone: (91) -22-66521000, Fax: (91) -22- 24900983
 May 6, 2010

§ Products reflecting healthy growth and increased market share: JLL’s brands have
increased their market share sharply over the last few years. The flagship Ujala fabric whitener
has seen its market share climb from 68.5% to 73.5% between 2006 and 2009; Maxo mosquito
repellant has seen the market share rise from 19% to 22.8%. Both these categories possess
strong competitors by way of players such as HUL, Godrej and Reckitt Benckiser. Exo
dishwash products has seen the South India market share from 11.7% to 23.8% between 2006
and 2009. The management is planning a nationwide launch of the Exo brand going ahead.
Market Dta

§ Rural India, a major customer base : With over 60% of its revenues originating from the rural
areas, we remain optimistic on growth prospects going ahead. A combination of increasing
support prices, improved rural credit have kept rural demand for products strong inspite of an
erratic monsoon. Another aspect worth noting is the revenue growth coming in on the back of
volumes, considering the company has not taken any price hikes over the past year.
§ New organised laundry venture: JLL has last year launched premium retail laundry care
services under its brand name Fabric Spa at Bangalore. The company had established a
subsidiary Jyothy Fabricare Services (JFSL) for the purpose. It has already established a
presence across 55 institutional clientele including ITC, Air France, Jet, Fitness One and Big
Bazaar Food Court. Going ahead, the company plans to expand the presence across India.
§ Agreement with DRDO: Most recently, JLL announced an agreement with the Defense
Research & Development Organization for an exclusive mosquito repellant technology. The
repellant, at present, is used specifically for the protection of military personnel. Keeping in
mind the mosquito related life-threatening diseases such as Malaria, Dengue, etc, the Govt. in
an effort to make the product available to the masses, has signed the agreement with JLL.
§ Strong Distribution Network: The company has ensured a strong urban and rural reach on
the back of a robust distribution network that includes a field staff of 2000 people and a
network of ~4000 distributors ensuring a reach of ~2.1mn retail outlets.
§ Robust financials: The Company has zero debt on its balance sheet since FY05 and its cash
& bank balance have formed 25-30% of the balance sheet and as of FY09; its cash balance of
Rs.1019 mn forms ~28% of the balance sheet size which is encouraging.

Financial Projections
Earnings Summary
Y/E Sales Growth EBITDA Margin Net EPS Growth P/E Div.
Profit Yield
31-Mar Rs. mn (%) Rs. mn (%) Rs. mn Rs. % X %
08A 3763 4.7 616 16.3% 451 6.2 -7.9 28.6 1.1
09A 3619 -3.8 495 13.6% 384 5.3 -15.0 33.7 1.1
10E 5429 50.0 825 15.2% 686 9.5 78.9 18.8 1.1
11E 7329 35.0 1209 16.5% 997 13.7 45.3 13.0 1.1
*Company has changed the financial year to Apr-Mar from July-June. So, FY09 figures are for 9 months

JLL strategy has involved operation in areas largely ignored by the FMCG majors. Cashing
in on the same, the company has established brands, working towards converting
customers from the unbranded and unorganized sector in areas of operations. A value-for-
money positioning in respect to brands offered, product extension launches, wide rural
presence and largely volume driven growth suggest the traction in JLL’s sales to sustain
over the coming years.
At the CMP, the stock is available at available at a PE of 13x FY11E, a significant discount to
the +20 PE for the industry. We do opine new launches besides a national rollout of
products would lead to a rerating for the stock and thus, value the company at 18x FY11
earnings for a price target of Rs.247.
This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable, HDFC Bank
Limited("HDFC Bank") does not warrant its completeness and accuracy. Whilst we are not soliciting any action based upon this information, all care has been taken
to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sale of any
financial instrument Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its
employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the
information contained in this material.
HDFC Bank and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have
long or short positions in, and buy or sell the securities thereof, of company(ies) mentioned herein. HDFC Bank may at any time solicit or provide commercial
banking, credit, advisory or other services to the issuer of any security referred to herein. Accordingly, information may be available to HDFC Bank, which is not
reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication.
HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Phone: (91) -22-66521000, Fax: (91) -22- 24900983