Q2FY24 Review: Jyothy Laboratories: Beat on all fronts

8 Nov 2023 , 12:41 PM

Jyothy Labs reported a strong Q2FY24 result outperforming the FMCG pack with a top-line growth of 11%, driven by 9% volume growth despite the subdued demand environment. The fabricare segment reported a sales growth of ~11% and Ebit margin of 26%. Analysts of IIFL Capital Services believe that the company will have to take price cuts in its Fabricare portfolio due to surge in competitive intensity which will moderate the overall sales growth as well as the margins. However, given the strong volume growth reported, analysts of IIFL Capital Services remain positive and expect the company to deliver a steady growth. They upgrade their EPS estimate for FY24/25/26 by 5.4%/5.6%/4.5%. Maintain BUY; TP Rs440. 

Beat on estimates:

The sales grew by 11% (4% above estimates) with personal care, fabricare and dishwash segments reporting a sales growth of 22.3%/10.6%/10% respectively. The gross margin (GM) and Ebitda margin expanded by 870bps/628bps YoY on account of moderating raw material prices. The Ebit for personal care, fabricare and dishwashing segments grew by ~33%/91%/49% respectively, whereas the HI segment reported a negative Ebit of ~Rs79mn. The company is focussing on improving the sales mix of HI segment by focussing more on the liquid vaporiser portfolio. 

Initiatives taken:

The company’s strong performance with regards to volumes growing ahead of its FMCG peers in the past few quarters is based upon: i) Increasing direct reach to ~1.1mn outlets (1mn in CY 22 end). ii) improving the quality of distribution via better systems/ processes. iii) launch of LUPs in dishwash category (Exo and Pril brands) which enabled it to acquire new customers. iv) product innovation by launching new variants in “Margo” (soap). 

EPS upgrade for FY24/25/26 by 5.4%/5.6%/4.5%: 

Analysts of IIFL Capital Services upgrade their sales estimate by ~0.6% and the Ebitda estimate for FY24/25/26 by 2.5%/2.4%/1.2%. They estimate the Ebitda margins for FY24/25/26 to be 16.8%/17%/17% in line with management’s midterm Ebitda margin guidance of 16-17%.