Neutral Jyothy Laboratories; target of Rs 160: Motilal Oswal

Motilal Oswal's research report on Jyothy Laboratories

Jyothy Laboratories (JYL)’s 1QFY23 revenue was in line with our estimate. Elevated commodity costs kept gross margin under pressure. The adverse impact was reflected in EBITDA margin, which stood at 10.2% (est. 12.5%). Revenue CAGR has been tepid at 5.5% over the preceding five years ended FY22. Revenue growth is the 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.

Outlook

With margin likely to remain under pressure due to elevated material cost, its earnings growth prospects remain challenging. We assign a 15x EV/EBITDA target multiple as we roll forward our Jun’24E targets, resulting in a TP of INR160. We maintain our Neutral rating.