Buy Jyothy Labs: target of Rs 170: Sharekhan

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Sharekhan's research report on Jyothy Labs

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% in soaps. Savings at manufacturing and other expenses will support OPM in the near term. Medium-term revenue drivers are new product additions, optimal utilisation of existing distribution reach, and improved penetration in the rural market. OPM is expected to sustain at 16%-17%.

Outlook

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.

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