Neutral Jyothy Laboratories; target of Rs 345: Motilal Oswal

Motilal Oswal's research report on Jyothy Laboratories

The company plans to further expand in the personal care category. Currently, JYL derives 45% of its revenue from fabric care, 35% from dishwashing products, 10% from household insecticides, and the remaining 10% from personal care items. The southern region accounts for 40% of JYL’s total business, while the remaining 60% is distributed across three other markets. Among the remaining three regions, the eastern market constitutes the largest share followed by the northern and western markets. Looking ahead, JYL is optimistic about 1HFY24 but expects challenges in the second half due to rising commodity and crude oil prices. Currently, 60% of the company's market is in urban areas, which are performing well. The remaining 40% in rural areas is expected to see growth in the coming years. The company aims for double-digit growth in FY24, mainly driven by increased sales volume. It also targets operating margin in the range of 15- 16%. Ad expenses are expected to remain within the 7-8% range.

Outlook

While valuations are inexpensive, we do not expect a major rerating anytime soon. We reiterate our Neutral stance on the stock with a TP of INR345 (24xFY25E target EV/ EBITDA).