Views are invited on Jubilant Industries Ltd. [ NSE – JUBLINDS ; BSE – 533320 ], a US$ 3 bn. Jubilant Bhartia Group company which counts amongst its group successful companies like Indian-listed Jubilant Foodworks, Jubilant Lifesciences and AIM-listed Jubilant Energy.
The most interesting aspect which compels us to invite fellow members' views with an aim to understand the company better is its valuation at just INR 220.24 cr. vis-a-vis FY12e revenues of INR 854 cr. & FY13e revenues of INR 1125 cr.. Such valuations, even when the company enjoys not only domestic but a world-leadership status in each of the operational segments makes the company hard to ignore for any serious fund manager. We have tried to deal with each and every aspect in our research note inluding the critical parameters of peers like Pidilite, Wacker Chemie (Germany), Pantaloon, Shoppers Stop, Aditya Birla Retail, Reliance Retail, Bharti Retail, etc.
Annual Report (2011) of the company as well as latest CSR Report ( as per GRI Standards – Audited by Ernst & Young) are attached alongwith the Research Note for reference.
Why Jubilant Industries Ltd. deserves to be a part of one's core portfolio ? :
Clean & Credible Management led by Mr. Hari Bhartia [ current President of Confederation of Indian Industry (CII) ] and backing of a strong US$ 3 bn. Jubilant Bhartia Group ( promoters of Jubilant Foodworks, Jubilant Lifesciences & Jubilant Energy-AIM Listed ) are the first and foremost factors that go in favour of Jubilant Industries Ltd.
High Corporate Governance followed by the company, which is evident from the fact that it is one of the few top-notch Indian & MNC companies which has voluntarily chosen to publish comprehensive annual Corporate Sustainability Report (CSR) as per Global Reporting Initiative (GRI) standards and its CSR2011 has attained the highest rating A+ and is audited by Ernst & Young.
Leadership Position (not only domestic but a world-leadership ) in each of the Operational Segment is the other highlight of the company. Before going into its details lets briefly analyse company's positioning in each of the operational segment :
2nd Largest Brand ( Jivanjor ) next to Pidilite's Fevicol in Indian Consumer Adhesives Segment
1st position in India ( 90 % share ) and 3rd position Globally in Food Polymer Segment (Solid PVA)
1st Position in India & 3rd Position Globally in Vinyl Pyridine Latex (VP Latex)
4th Largest Brand (Ramban) in Indian SSP Fertilizer Segment
2nd Largest Hypermarket Chain with 20 % marketshare in Bangalore
Revenues of Performance Polymer Segment (which includes Consumer Products-Jivanjor Brand, Food Polymer & Latex Business) has grown over last five years at a CAGR of 17.8 % backed by a 8.3 % CAGR in actual volumes. If we exclude here the low-margin Application Polymer business, which the company has disposed off in FY11, then, the actual volume and sales performance of Consumer Products, Food Polymer and Latex Business is really heartening and signals robust demand for company's products in each of the segment.
Now, we will go into slight detail of each of the operational segment of Jubilant Industries Ltd. starting with Consumer Products Segment.
Consumer Products Segment ( Jivanjor Brand ) contributed ~Rs. 120 cr. to FY11 revenues of the company. Under this segment, company manufactures and sells consumer & woodworking adhesives, footwear adhesives, epoxy sealants and wood finishes. Its Jivanjor Brand in adhesives segment, which, the company has built over last many years, has withstood the pressure from the likes of Pidilite and Huntsman and progressed to become 2nd Largest Brand after Pidilite's Fevicol in Organised Indian Consumer Adhesives Market.
Company has renewed the thrust on R&D and considerably strengthened distributor network in last few months to aggressively penetrate further deep into the Indian Market so as to make Jivanjor an even stronger No.2 Brand and capture some marketshare out of the peers. A case in point here is its recent launch of its super premium category adhesive 'Lamino', which is first of its kind adhesive launched by any company in India designed specifically for laminates. Its recent launch in Delhi, Mumbai, Hyderabad, Chandigarh and other major towns of India met with tremendous positive response and this product is expected to contribute handsomely in second half of FY12.
To move to the second operational segment, viz., Food Polymers, under which company manufactures and is a global supplier of Solid PVA which is used to make gum base of chewing gum and bubble gum. It is the only manufacturer in India commanding ~ 90 % marketshare domestically and is the 3rd largest supplier to global chewing gum and bubble gum industry.
It is worthwhile to note here that Gum Industry worldwide is highly concentrated with top 6 players accounting for ~85 % market. Jubilant counts amongst its international clients, Wrigley's, Perffetti and GumLink which together account for ~50 % of the world gum market.
Also, the Solid PVA market itself is a very concentrated one with top 4 manufacturers supplying 75 % of the global demand. Jubilant atpresent occupies 3rd largest position in global Solid PVA suppliers list and with the recent doubling of capacity of its plant, the company is set to become the 2nd largest Solid PVA manufacturer of the world after Wacker Chemie of Germany. Its entire expanded capacity is booked which augurs very well for the visibility of growth in this segment till FY15.
Third operational segment of the company is Latex under which it manufactures and is a global supplier of synthetic lattices like VP Latex, SBR Latex and NBR Latex. This segment contributed ~Rs. 80 cr. to FY11 revenues of the company. It is worthwhile to note here that Jubilant was amongst the first companies to introduce VP Latex in India and is currently occupying No.1 position domestically and No.3 position globally in VP Latex. Company has recently expanded its capacity of Latex manufacture by 15 % in FY11 considering high demand for its products and the increased capacity utilisation is expected to show benefit in current FY12.
Agri-Inputs is the fourth operational segment of the company which is dominated by 'Ramban' Brand. This segment contributed ~Rs. 261 cr. to FY11 revenues of the company. Here again the company's acumen of building strong brands becomes evident as its Ramban brand occupies the fourth largest SSP fertilizer brand position in India. SSP fertilizer industry, which got a fillip because of the new NBS policy of Indian Government, is expected to reap rich rewards because of SSP fertilizer's positioning in the entire complex fertilizer landscape. Favourable treatment in NBS policy has made SSP fertilizer the cheapest and most effective amongst the lot becuase of which SSP fertilizer consumption in India is projected to grow to 6 mn. MT by FY13 from current 3.5 mn. MT. This is the basic reason why major Urea producers like Chambal Fertilizer and Tata Chemicals have recently decided to set-up new plant and expand existing capacities for SSP manufacture to capitalise on the opportunity this sector has in store for coming few years.
With an expected annual industry growth of ~35 % (especially SSP Fertilizer) for coming two fiscals, Agri-Input segment of Jubilant is expected to be a steady cash generator as the company improves capacity utilisation based on higher demand. It is worthwhile to note here that when other major peers in this segment (SSP) like Liberty and Khaitan have choose to aggresively expand the capacity of their plants as also to set-up new plants in anticipation of demand, Jubilant has decided to play safe by only concentrating on improving utilisation of its existing capacities so that this segment remains steady cash generator to feed the exponential growth of Retail (Hypermarket), Food Polymer and Consumer Products (Jivanjor Brand) segments.
The last but most promising operational segment of the company viz., Retail (Mall cum Hypermarket) is the result of Jubilant Industries' recent acquisition of a group firm which runs a Hypermarket chain under brand 'Total' and has, as on date, ~8,25,000 sq.ft. under opration in 5 mall-cum-hypermarkets with another 1,12,000 sq.ft. getting operational by Decemember'2011 which will make it the 3rd largest hypermarket chain of India and Largest (No.1) hypermarket chain of Bangalore in terms of area under operation. All the other hypermarket chains of India except (Pantaloon) including Hypercity (Shoppers Stop), Trent (Star Bazaar), Bharti Retail (EasyDay Market), Reliance Retail (Reliance Mart), Max Retail (SPAR Hypermarket), RPG group (Spencer Hyper) and Aditya Birla Retail (More) have less than 9,00,000 sq.ft. under operation as on date [ Refer Page 18 for all Hypermarket Chains details ]. Although, like-to-like comparision here is improper since the format of Jubilant (Total) is of mall-cium-hypermarket which no one else follows but, still, such a huge area of operation will bring in lot of cost efficiency and drive exponential growth from FY13 onwards.
FY11 revenues of Retail segment was Rs. 315 cr.
The most interesting aspect here, which speaks highly of the transparent and ethical practices followed by the management of Jubilant is evident from the fact that inspite of Retail division of the group currently being 100 % owned by the promoters of Jubilant Industries as also exuberant valuations at which listed retail companies are trading at present on the bourses where, even Hypercity (the only pure comparable peer) was acquired by Shoppers Stop at more than 0.5 times sales just last year, the company has decided to issue only 0.38 cr. (38.35 lacs) shares as consideration for 100 % acquisition of Retail business, which, at current market price of Jubilant Industries, works out to be only Rs. 71 cr.
To acquire such promising Retail business at just 0.2 times FY11 sales inspite of it having one of the largest areas under operation in India with a leadership position in Bangalore commanding 20 % marketshare, signifies a great deal of justice done with minority shareholders of Jubilant Industries for which the management deserves an applaud.
contd... further in Attached Research Note
http://www.bseindia.com/xml-data/corpfiling/AttachLive/Jubilant_Industries_Ltd_211111.pdf
Rgds.
On Nov 3, 8:42 am, mahesh <equityanalystinves...@gmail.com> wrote:
> JubilantIndustriestoday announced its Q2FY12 results.... Results
> beat the upper range of our estimates by ~8 % ....
>
> Total Revenue = INR 161.25 cr. (Our estimate – 134-148 cr.)
>
> EBITDA = INR 14.83 cr. (Our estimate – 12.1 – 13.8 cr.)
>
> Breakup of Revenues – Segmentwise
>
> Agri Input = INR 73.15 cr. (Our estimate – 58-65 cr.)
>
> Performance Polymers (CP, Latex & Food Polymer) = INR 87.27 cr. (Our
> estimate – 76-83 cr.)
>
> My Initial Take post Q2FY12 numbers :
>
> Company's performance polymers business (which includes Consumer
> Products, Food Polymer & Latex) is growing robustly while Agri-Input
> segment is proving to be a steady cash generator as anticipated.....
>
> Agri segment would have even performed excellently especially on
> EBITDA front provided Govt.'s favourable ruling had come on subsidy
> front which is still under consideration and decision is expected
> shortly.... In case of favourable ruling, PAT for H1FY12 would
> increase by ~9 cr. which will add to the robust cash generated by Agri
> division.... It is worthwhile to note here that while majors like
> Coromandel and Khaitan have published their Q2Fy12 results without
> making provision for adverse ruling thereby including the revised
> subsidy figures into the results,Jubilanthas decided otherwise and
> not included the revised subsidy figures into H1FY12 results
> signifying great amount of transparency adopted in accounts....
>
> The scheme of merger of retail division is already filed on 14th
> September 2011 with Allahabad High Court and approval should be
> received by December 2011....
>
> For Q2FY12,JubilantIndustrieshas attained EPS of Rs. 12.46 while
> for H1FY12 company has attained an EPS of Rs. 24.33....On full year
> basis, company should easily attain an EPS of Rs. 40 + for FY12 which
> means that at current market price of Rs. 190, its trading at a p/e
> multiple of just 4.75, forget here the mcap-to-sales which is dismally
> low at 0.26...
>
> Balance Sheet is very strong with a debt-free status and cash of Rs.
> 39.25 cr. on books as at 30th September 2011 in addition to parked
> money in liquid funds amounting to Rs. 13.18 cr. which simply means
> Hard Cash & Cash Equivalents of Rs. 52.43 cr. on books as at the end
> of H1FY12.....
>
> With :
> Rs. 66 per share as cash on books,
>
> a 550 cr. revenue of core businesses which are themselves expected to
> grow by minimum 20 % for atleast next 3 years
>
> ~Rs. 370 cr. + revenues generating Retail business to be merged with
> the listed entity,
>
> : makeJubilantIndustriesgrossly undervalued stock on the bourses
Rgds.
On Nov 22, 12:16 pm, mahesh <equityanalystinves...@gmail.com> wrote:
> Link to Scheme of Merger -- Meeting on 2nd December 2011
>
> http://www.bseindia.com/xml-data/corpfiling/AttachLive/Jubilant_Indus...
Now, with regards to rising copetition, yes, it will rise and that too
to a considerable extent but existing smart players will not suffer
much because they will tie-up with one foreign partner or other in the
years to come in order to expand... Also, heavy competition is quite
far away say 4-5 years away before which each of the existing player
will have great run in terms of exponential growth in financials.....
If one just goes by hypermarket chains, which is the tried-and-tested
format worldwide and most suitable especially for India, there are not
more than 10 group chains operating in India at present and each of
these chains will attract fdi in one way or other......
Now, with rgds. to intent of Jubilant management to attract partner...
I am quoting following sentence from the press release issued by the
company at the time of announcement of merger..
"""To enable the company to attract a different set of investors,
strategic partners who can bring relevant experience for the growth of
this business """
Now, with rgds. to attractiveness of Jubilant as an attractive
candidate for JV, in a fast-growing city like Bangalore, Jubilant is
occupying 2nd largest position with 20 % marketshare and so no serious
foreign retailer can ignore this company....However, such tie-up will
be in which form that is to be seen as still its slight away as
Karnataka is a BJP-ruled state and so far only Narendra Modi of BJP-
ruled Gujarat has expressed intention to go ahead with fdi in m.b.
retail in his state....
I think the management will utilise this opportunity to expand and
have national presence as once profitability gets achieved by FY14,
the company had plans to expand into other cities with per city
investment of 450 cr... This plan could be preponed and A JV can be
formed for this as foreign partner can bring-in technology, expertise
and funds and Jubilant can replicate its tested mall-cum-hypermarket
model and execute it in each city.
All and all, although a JV is quite far away but the attractiveness of
Jubilant Industries as one of the most attractive and safe investment
opportunity has only increased by recent reform of the govt. and from
current levels downside is minimal but upsides are tremendous.
Feel free to get back to me in case of any query.
Rgds.
On Nov 22, 12:16 pm, mahesh <equityanalystinves...@gmail.com> wrote:
> Link to Scheme of Merger -- Meeting on 2nd December 2011
>
> http://www.bseindia.com/xml-data/corpfiling/AttachLive/Jubilant_Indus...