Hold Jyothy Laboratories; target of Rs 150: ICICI Direct

ICICI Direct's research report on Jyothy Laboratories

Jyothy Lab (JLL) posted strong results with 7.6% revenue growth led by 8.5% volume growth. Dish washing, household insecticide (HI) & personal care segments saw robust growth of 23.6%, 22.6% & 14.5%, respectively. The healthy growth in dish washing was led by higher ‘at-home’ consumption & more usage of hygiene products. HI segment growth was led by higher caution about health & hygiene. Similarly personal care segment (Neem based Margo Soap, hand wash & sanitisers) growth was led by higher consumer demand for natural products. Fabric care segment de-grew 11.7% given dismal sales of Ujala Crisp & Shine & Henko (sales were impacted by modern trade channel uneven operations). JLL has benefited from its large presence in rural markets. Gross margins expanded 184 bps with sharp decline in crude based commodity prices. Employee spends to sales, overhead spends to sales increased 50 bps each. The company maintained its advertisement spends at 6% to sales. Operating profit rose 12.4% to Rs 88.9 crore. Operating margins expanded 80 bps to 17.8%. Led by strong growth in operating profit, PAT grew 14% to Rs 60.7 crore.

Outlook

Though JLL has been able to witness profitable growth in dish washing & personal care segment over the years, the saturation in fabric care segment & continued losses/low profitability in HI segment remain a concern. The company has not been very aggressive behind new launches & advertisement spends have been fairly low. The stock is trading at 23x & 21x FY22E & FY23E earnings, respectively. We maintain our HOLD recommendation on the stock with a revised target price of Rs 150/share.