Q1FY24 Review: Jyothy Laboratories: Firing on all cylinders

26 Jul 2023 , 12:55 PM

Jyothy Labs reported Q1FY24 results with beat on all fronts. Topline beat was primarily driven by Personal Care and Fabricare segments clocking strong double-digit growth, driven by distribution expansion efforts. Margin beat was driven primarily by better-than-expected performance on the gross margin front (+801bpsYoY). Analysts of IIFL Capital Services upgrade their EPS estimates by 5-6% for FY24-26 and maintain BUY with a TP of Rs330.

Beat on all fronts: 

Jyothy labs reported a strong Q1FY24 with a net sales growth of 15% (6% above Analysts of IIFL Capital Services estimates) and Ebitda growth of 96% (19% above IIFL estimates). Ebitda beat was driven largely by sharp gross margin improvement – up 801bps YoY and 214bps QoQ. Fabric Care and Personal Care posted strong double-digit growth of 18%/21%YoY, with Ebit margins expanding 985bps/1467bps to 22.1%/18.2% respectively.

Distribution-led growth: 

Volume growth for the company stood at 9%, largely led by distribution expansion. It has been swift in capturing the demand in rural through increasing focus in LUPs, which has led to the increase in market share. The direct reach stood at 1.1mn outlets as of FY23 end (1mn in end-FY22), with the company reaching all the villages above 100k population in India directly. Going forward, mgmt targets an addition of 100k outlets per year.

EPS upgrade of 5-6%: 

The company has delivered a strong volume growth of 9%YoY on a normal base at a time when the FMCG majors like HUL have shown muted volume growth of 3%. Price hike anniversaries were offset by pickup in volume growth, leading to strong growth on the top line. Mgmt has guided for a double-digit top-line growth for FY24 (Analysts of IIFL Capital Services have built in 10%). The company has clocked an Ebitda margin of 17.1% in Q1 and going ahead, analysts of IIFL Capital Services expect the FY24 margins to moderate slightly from these levels. They upgrade their EPS estimates by 5-6% for FY24-26 to factor in the strong beat on top line and margins. Analysts of IIFL Capital Services expect an EPS Cagr of 20% over FY23-26 and maintain their BUY rating with a target price of Rs330.