Neutral Jyothy Laboratories; target of Rs 200: Motilal Oswal

Motilal Oswal's research report on Jyothy Laboratories

Jyothy Laboratories’ (JYL’s) topline growth in 4QFY23 was lower than our estimate, due to a weak volume growth of around ~3.3%. For FY23, volume growth stood at ~3%. Currently, the company’s direct reach stands at 1.1m and the management has underscored its emphasis on broadening reach to drive volume growth Gross margins surprised positively by improving 420bp YoY and exceeded our expectation by 170bp. The management highlighted that margins would persist in this range in the near to medium term. Despite a decent FY23, JYL’s EBITDA CAGR for the five years ending in FY24E is expected to remain in single digits. A topline growth rate of over 15% remains elusive, which is crucial for a company of JYL’s size (revenues of INR24.8b in FY23). We reiterate our Neutral stance on the stock.

Outlook

While valuations are inexpensive, we do not expect a major rerating anytime soon unless the topline growth trajectory surpasses mid-teen levels in the near term. We reiterate our Neutral stance on the stock with a TP of INR200 (15xFY25 target EV/ EBITDA).