Q3FY24 Review: Jyothy Laboratories: Strong growth trajectory continues

2 Feb 2024 , 11:50 AM

Jyothy labs reported a strong Q3FY24 with top-line growth of 10.6%, driven by a volume growth of 11% despite no uptick in the industry demand momentum. The top-line growth was driven by fabric care and personal care segments clocking revenue growth of ~12%/22%. Softening raw material prices and superior product mix aided the gross margin beat (+666bps vs IIFLe: 540bps). With recovery expected in the rural demand sentiment, analysts of IIFL Capital Services expect the current growth trajectory to sustain. On the back of a beat on margins, they upgrade their EPS estimate for FY24/25/26 by ~6-7%. Maintain BUY; TP Rs550. 

Beat on all fronts:

The sales grew by ~10.6% (1.5% above analysts of IIFL Capital Services estimate) with fabric care/dishwashing/personal care reporting a sales growth of ~12%/7%/22% whereas HI reported a modest sales growth of ~5%. The gross margin/Ebitda margin expanded by ~670bps/370bps YoY on account of moderating raw material prices. The Ebit for fabric care/dishwashing/personal care grew by ~53%/26%/3% whereas HI reported an Ebit loss of Rs93mn (35% above Q3FY23 loss of Rs69mn). 

Growth momentum to sustain: 

The company has been reporting strong growth momentum in the past few quarter on the back of following initiatives: i) expansion of distribution footprint (increase in retail outlets as well as SKU per outlet) as well as distribution quality, ii) investing behind its brand in the form of advertisement by focussing on digital as well as outdoor spends in addition to television , iii) launch of LUPs in dishwash category to increase penetration and iv) good performance by NPDs (eg:liquid detergent in Henco and Ujala, new variants of Margo etc). Analysts of IIFL Capital Services expect the strong growth momentum to continue on the back of improvement in rural demand sentiment backed by strong execution abilities of the company. 

EPS upgrade by ~6-7%:

On the back of beat on margins, analysts of IIFL Capital Services upgrade their Ebitda estimate for FY24/25/26 by ~5% and the EPS estimate for FY24/25/26 by ~6-7%. The estimate the Ebitda margin for FY24/25/26 to be ~17.5%/17.8%/17.8%. Maintain BUY, TP ₹550.