JHS Svendgaard Laboratories Ltd
(BSE Code: 532771) (CMP: Rs.31.90) (FV: Rs.10) By Subramanian Mahadevan
JHS Svendgaard Laboratories Ltd (JHS) started as a toothbrush manufacturer in 1997 and gradually ventured into toothpastes and other oral products with manufacturing locations in North India. It is primarily engaged in the manufacture of oral care products such as toothpaste, toothbrushes, whitening gels, whitening mouth rinse and effervescent tablets. Its anchor-free technology enabled toothbrush machine has been imported from Belgium while state-of-the-art toothpaste manufacturing machinery has been imported from Korea and Sweden. JHS hit the capital market in
2006 with its IPO priced at Rs.58/share, which was oversubscribed two times. In terms of sectoral opportunity, the total size of the Indian oral care market is ~Rs.9000 crore is dominated by toothpaste (75% share, Rs.6750 crore) and toothbrush (17% share,
Rs.1500 crore). The toothpaste segment is dominated by key incumbents – Colgate (55.6% market share), HUL (19.2%) and Dabur (15.5%). With over 300 million Indians without any access to oral care products, Colgate has cornered this population by reaching out to 125 million school children across the country. Second movers like JHS will largely benefit from the huge groundwork undertaken by Colgate to develop and expand this category. From a near-death experience and litigation issues resulting in a one-time settlement with Procter & Gamble, JHS has emerged stronger over the last decade and has reinvented itself in a new avatar by launching its own branded products to garner a larger pie in the oral care segment. It has won multi-year marquee clients like Dabur, Patanjali, etc. It has enhanced 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.
Investors should participate in the growth cum turn-around story of JHS considering the tailwinds of the secular oral care sector growth, improving market share of the company and capacity expansion. Buy on every decline for good double-digit returns in the next two years.