In the last five trading sessions of July, Jyothi Labs, a leading FMCG player, witnessed an impressive surge of nearly 29% in its share price, rising from ₹242.45 to ₹311.80. This remarkable rally can be attributed to the positive impact of its Q1 FY24 performance, which was released on July 24.
Zooming out to encompass the entire month of July, the stock continued its bullish momentum with a substantial return of 44.45%. This upward trend was consistent from June, where it gained 3.15%, and also in the preceding months of May and April, with gains of 7.45% and 2.23%, respectively.
Jyothy Labs is a mid-cap stock with a market capitalization of ₹11,427 crore. The company is engaged in the manufacturing and marketing of fabric care, dishwashing, personal care, and household insecticide products.
It has a leadership position in the fabric whitener category in India, whereas it ranks number two in the dish wash bar, liquid, and mosquito repellent coil categories.
The company’s flagship brand, Ujala, has remained at the top of the fabric whitener category since its launch, with an 80% market share, according to brokerages.
For the June-ending quarter, the company reported a 101.7% jump in its consolidated net profit at ₹96.3 crore as against a net profit of ₹47.7 crore.
It witnessed a 15% YoY growth in operating revenue to ₹687 crore in Q1FY24. The gross margin expanded to 47.9% in Q1FY24 from 39.9% in a year ago quarter on the back of a softening in RM costs. The operating profit came in at ₹117 crore, a surge of 95% YoY, while the EBITDA margin increased 70% YoY to 17%.
Fabric Care and Dishwashing continued to do well with 18% YoY and 11% YoY revenue growth, while Personal Care witnessed accelerated growth of 21% YoY driven by good performance in the base variant of Margo. HI witnessed a decent recovery (up 10% YoY) after facing headwinds last year, said brokerage firm ICICI Securities.
In its earnings report, Jyothi Labs outlined its strategic approach for the fiscal year (FY24). In the Fabric Care segment, the company aims to maintain its focus on premium and value offerings in detergents while venturing into new geographies for post-wash products, thereby expanding its reach across categories.
For the Dish Wash segment, Jyothi Labs seeks to strengthen brand equity and become the preferred choice among consumers to gain a larger market share. In Household Insecticides, the company aims to consolidate and innovate to increase market share across formats.
In the Personal Care category, Jyothi Labs plans to leverage the brand equity of Margo and explore entry into new formats and categories. The company also intends to scale up its offerings in the Toilet Soap category.
"Jyothy Labs continues to gain market shares across most of its categories over the last few years. We like management’s strategy of prioritising market share gains and volume growth. Stock is still in the value-zone after 70% one-year returns, in our opinion," said ICICI Securities.
The brokerage has raised its earnings estimates by 1% for FY24. It projected a revenue, EBITDA, and PAT CAGR of 12%, 27%, and 34%, respectively, over FY23–25E.
Maintaining a 'buy' rating, the brokerage has revised its DCF-based target price to ₹340 apiece from the previous ₹250. At this target price, the stock will trade at a P/E multiple of 30x March-25E.
Having said that, the brokerage also outlined some key downside risks for the company, including high competitive pressure and significant input cost inflation impacting margins.
Earlier in March, Sharekhan maintained its 'buy' rating on the stock with a target price of ₹240, citing the sharp decline in crude oil prices as a positive factor for the company's margins. The new product launches, along with extending its recent launches to new markets and expanding the distribution network, will help the company to gain market share in key categories, it said.
09 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.