Neutral Jyothy Laboratories; target of Rs 150: Motilal Oswal

Motilal Oswal's research report on Jyothy Laboratories

Sales in 4QFY22 were in line. Gross margin was affected due to elevated raw material prices. The impact was reflected in EBITDA margin, which stood at 10.6% (est. 12%). Revenue growth is key for a company with sales of only ~INR22b. The likelihood of a consistent 15% sales growth (essential for any re-rating) continues to appear difficult, despite JYL’s efforts to ramp up its total and direct reach. Sales CAGR have been a tepid at 5.5% for the preceding five years ending FY22. With margin likely to remain under pressure over the next few quarters due to high input costs, its earnings growth prospects remain weak. We maintain our Neutral rating.

Outlook

RoCE, at 11% in FY22, remains far inferior v/s its peers. No marked uptick is visible over the medium term. We assign a 15x EV/EBITDA target multiple to our Mar’24E target, resulting in a TP of INR150 per share. We maintain our Neutral rating.