Jyothy Labs Ltd. share price target

EBITDA margin declined by 540bps YoY to 11.3% (Vs.11.4% in Q2FY22 & 12% in Q1FY22) due to 710bps reduction in Gross margin on account of sharp increase in input prices. Some input prices have peaked out, but...

Price hike insufficient to curb margin decline whiteners, detergents, dishwashing products, household insecticides (HI) & personal care products. The company has a leading brand Ujala in fabric whitener with 84.5% market share. It has a sizable dish washing & HI business with mid-teens market...

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...