Jyothy Labs Ltd. share price target

Sales came in above our estimate in 3QFY22. While gross margin was affected by steep material cost inflation, it was in line with our estimate. However, higher-than-anticipated ad spends led to a miss on operating margin. While input costs are expected to remain elevated, the benefits of price hikes would come into effect in 4QFY22 and should provide a sequentially better margin, notwithstanding sharp inflation further. Topline growth is key for a company with sales of just over INR20b. The likelihood of consistent 15% sales growth (essential for any re-rating)...

whiteners, detergents, dishwashing products, household insecticides (HI) & personal care products. The company has leading brand Ujala in fabric whitener with 84.9% market share. It has a sizable dish washing & HI business with mid-teens market share. Large part of the revenue is generated from Kerala and Tamil Nadu. The company has 23 manufacturing facilities in India. Its pan-India distribution reach is close to 2.8 million outlets with direct reach of 0.86 million. Its major brands include Ujala & Henko in fabric wash, Exo & Pril, in dishwashing, Margo in soaps & Maxo in HI categories...

For Q1FY22, revenue grew by 21%YoY backed by healthy growth across all categories owing to higher growth in General Trade (GT) and E-Com channels. Dishwashing grew by 22%, Personal care (13.5% YoY), and Household Insecticides-HI (13%YoY) on YoY basis. JLL's enhanced focus on essential hygiene products along with healthy rural demand aided volume growth. Fabric care segment grew by 27% YoY (Vs de-growth of 24% in YoY quarter) but is still to reach pre-covid levels due to work from home culture and closure of schools. Covid-19 have changed consumer preferences more towards essential & hygiene products. ~85% of the product portfolio comprises of...

JLL is enhancing its rural distribution network by adding 500 sub-stockists in FY21. Moreover, it is also concentrating on increasing van coverage in rural India to drive penetration & frequency of consumption. In urban regions, it has increased its direct distribution reach to ~9 lakh retail outlets. Moreover, the company has also rationalised trade pipeline by 10 days after implementing continuous replenishment system (CRS). We believe distribution upgradation & expansion would drive growth in dishwashing category for the company. We estimate 9.3% revenue CAGR in FY21-23....

While there has been improvement in net WC days and the company is now net debt free, topline growth is key for a company with sales of only INR19b. The likelihood of 15% sales growth continues to appear difficult. Sales growth CAGR has been 3.7% in the preceding five years. With margin likely to under pressure due to material cost increase, earnings growth prospects remain weak. Maintain Neutral Double-digit volume growth, overall performance below our expectation...

The revival of consumer sentiment has been reflected in the company's performance across the brand portfolio. The company has been focusing on volume led sales growth, brand building, product innovation, and cost rationalization measures leading...

Essential hygiene products and rural demand aided growth. For Q3FY21, revenue grew by 13%YoY backed by strong growth in Dishwashing (21%YoY), Personal care (48% YoY), and Household Insecticides-HI (10%YoY) segments on YoY basis. JLL's enhanced focus on essential hygiene products along with strong rural demand aided volume growth. Fabric care grew by 2% YoY Vs de-growth in the last 4 quarters. Covid-19 and Work from home trends have changed consumer preferences more towards essential & hygiene products. JLL's ~85% of the product portfolio comprises of essential & hygiene products. The company added Exo All...

New products, SKUs driving growth in dishwashing Dishwashing is 38% of total sales and has seen robust growth of 20.6% in 9MFY21. We believe new variants & smaller pack in rural regions have been driving growth for the company. In last two years, JLL has launched two variants under Pril Brands (Tamarind & Lime). Further, it has launched dishwash gel, vegetable cleaner & disinfectant & smaller pouches. We believe the growth momentum would continue in the category given it is penetration led. Moreover, few scalable variants at other regions would...

While higher than expected operating margin and lower interest cost led to in line EBITDA and a beat on PAT, there is nothing to indicate that the sales trajectory going forward is going to recover sharply from the measly 2.5% CAGR in the past five years ending FY20. We maintain our Neutral rating on the stock. JYL's 3QFY21 standalone net sales grew 15.3% YoY to INR4.7b (v/s our estimate of INR4.9b). Volumes rose by ~15% YoY. Standalone gross margin expanded 70bp YoY to 48.3% in 3QFY21....

We retain our Buy recommendation on Jyothy Labs Limited (JLL) with an unchanged price target of Rs. 170; discounted valuation at 19x its FY2023E EPS with stable growth prospects in the medium terms makes it a good pick in the consumer goods space. Volume growth momentum to sustain in Q3 with dishwashing and personal care categories likely to maintain double-digit growth, while fabric care recovered to 100%. HI with large presence in North and East is a seasonally weak quarter but will grow on a y-o-y basis. With some of the key input prices (including packaging material and palm oil), gross margins are expected to be lower on a y-o-y basis. The company will be taking price hike of 3%-5%...