Neutral Jyothy Laboratories; target of Rs 305: Motilal Oswal

Motilal Oswal's research report on Jyothy Laboratories

Jyothy Laboratories (JYL) reported an overall beat on our estimates in 1QFY24. It gained market share with volume growth of 9%. JYL reported EBITDA margin of 17.1% (est. 14.6%), led by moderation in input costs. GP margin came back to the normal level at 47.9% (est. 45.8%). The likelihood of 17% EBITDA margin for further quarters appears to be difficult as the company has guided for 15-16% margin for FY24 and volatility in RM prices. Other income included a one-off item of ~INR90m on land sale at a plant. Despite good results in 1QFY24 (albeit on a low margin base of 1QFY23), JYL’s sales and EBITDA CAGRs for five years ending in FY24E are expected to remain in single digits. We maintain our Neutral rating on the stock.

Outlook

We do not expect a major rerating anytime soon. We reiterate our Neutral stance on the stock with a TP of INR305 (21xFY25E target EV/ EBITDA).