Buy Jyothy Labs; target of Rs 496: Geojit Financial Services

Geojit Financial Services research report on Jyothy Labs

Jyothy Labs Ltd. (JLL) is an Indian FMCG player with products across fabric care, dishwashing, mosquito repellents & personal care . For Q2FY25, revenue growth was flat YoY largely, due to a high base of 11% last year. Volumes grew by 3% YoY while increased grammage and price cuts impacted value growth. Main segments, fabric care & dishwash (78% mix), along with household insecticides, witnessed flat growth while personal care declined by 4.5% YoY. EBITDA margin improved by 40bps YoY to 18.9% despite an increase in ad spend to 8.3% of sales vs 7.8% YoY. However, the company guides for 16-17% EBITDA margin for FY25 due to rise in input prices and requirement for brand investment to support new launches. JLL guides for mid to single digit volume growth factoring disruption in July in the southern region, which contributes ~40%, a high base last year and price hike plans for personal care in Q3FY25 due to higher palm oil prices. JLL has a strong focus on distribution and direct reach has increased to 1.2mn from 86k in FY21. This, along with new launches, has strongly supported double digit growth in last 2 years. JLL will continue to carefully add the distribution.

Outlook

We lower our target price to Rs. 496 by valuing at 36x December 2026E EPS (2Yr avg=35x), but upgrade to BUY rating considering expected improvement in demand in H2FY25 and recent correction in stock price.