Hold Jyothy Laboratories: target of Rs 175: ICICI Direct

ICICI Direct's research report on Jyothy Laboratories

Jyothy Lab (JLL) reported healthy results with 15% volume growth led by robust growth in dishwashing & personal care segments. Standalone revenue grew 15.3% to Rs 469.4 crore. Dishwashing, personal care & household insecticide (HI) segment revenue grew 21.1%, 48.2% & 10%, respectively, whereas fabric care business saw dismal 2.3% growth in Q3FY21. Though detergent segment has recovered fully, fabric whitener has only recovered to 90-95% of pre-Covid levels. We believe fabric whitener sales concentration is higher in south (specifically Kerala), which has been impacted by second wave of Covid cases & restricted out of home activity. The strong growth in most other segments was led by strong rural growth through smaller SKUs (Rs 5-10 sachet pack) penetration & specifically high demand of natural brands in personal care. The company increased media spends by 44% to Rs 35.1 crore largely to spend behind Maxo, Margo & new launches. Gross margins improved 67 bps largely due to benign crude based raw material cost. Despite higher ad spend by 147 bps, saving in overhead spends & gross margin uptick led to operating margins expansion by 102 bps to 17%. Led by strong growth in operating profit & lower interest cost, PAT increased 22.8% to Rs 52.2 crore.

Outlook

We maintain our HOLD recommendation on the stock with a revised target price of Rs 175 share (earlier Rs 150/share).