Buy Jyothy Labs; target of Rs 640: ICICI Securities

ICICI Securitie's research report on Jyothy Labs

JYL's Q1FY25 revenue / GP / EBITDA / recurring PAT growth (YoY) was 8 / 16 / 14 / 6 (%). Revenue growth of 8% YoY to INR 7.4bn was driven by 11% YoY volume growth (material outperformance vs peers on a relatively higher base vs peers). Volume outperformance continues to be driven by focus on rural distribution, innovation, new SKUs to cater specific consumers needs and ecommerce coupled with continued support from ATL and BTL spends; it is one of the few companies which did not reduce ad-spends materially during periods of input inflation (FY22 and FY23) to manage operating margins and the results are visible now – double-digit volume CAGR over 2Y (11.5%), 3Y (12.2%), 4Y (14.4%).

Outlook

We increase our estimates by 4% / 3% for FY25E / FY26E. We model revenue / EBITDA / PAT CAGR of 12 / 15 / 19 (%) over FY24-26E. We maintain BUY with a DCF-based revised target price of INR 640 (was INR 520). At our target price, the stock will trade at 44x P/E multiple Mar-26E. Key downside risks are higher competitive pressure and significant input cost inflation impacting margins.