Jyothy Lab - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 155, MCap - Rs. 5,708 crore)

Jyothy lab posted strong results in Q3FY21 with 15.3% sales growth & 22.8% earnings growth.

Q3FY21 Earnings Summary

- Standalone Revenue grew by 15.3% to Rs. 469.4 crore led by 15% volume growth. Dishwashing, Personal care & Household Insecticide segments witnessed a robust 21.1%, 48.2% & 10% revenue growth whereas fabric care business saw dismal 2.3% growth during the quarter. The healthy growth is dishwashing segment was led by prominence of smaller packs in rural regions. Further consumption shift from unbranded (local products) to branded have accelerated in FY21, which helped Jyothy Lab in growing its brands. The strong growth in personal care segment has been on account of increasing preferences of natural products & focus on distribution of relatively newer launched products (face wash, hand wash & sanitizers)

- Gross margins improved by 67 bps largely due to benign crude based raw material cost. The company has increased its advertisement spend by 43.5% to Rs. 35.1 crore (147 bps higher as % of sales) in Q3 whereas it has been able to save similar 143 bps on overhead spends resulting in operating profit growth of 22.6% to Rs. 79.8 crore. Operating margins expanded by 102 bps to 17%.

- Led by strong growth in operating profit & lower interest cost, Net profit increased by 22.8% to Rs. 52.2 crore

Jyothy lab has been benefited by significant increase in rural spends in FY21 mainly led by higher government spend post pandemic. Moreover, benign raw material cost helped in improving operating margins. Out of the four major segments, Dishwashing & Personal care has seen a strong sustainable growth in last few years with increasing rural penetration of company's brand (Pril & Exo, Margo). Fabric whitener category has been saturated & has been growing only in selected regions in South India. Despite household insecticide is growing at a faster pace post pandemic period, it is still a loss making category for the company due to higher product concentration on Coils. We believe the structural growth in matured category would require higher advertisement spends on sustainable basis, which would cap operating margins at current levels. We will review our recommendation & target price.

We will be coming out with detailed update after the conference call with the management.

Shares of JYOTHY LABORATORIES LTD. was last trading in BSE at Rs.151.9 as compared to the previous close of Rs. 157.65. The total number of shares traded during the day was 57333 in over 1687 trades.

The stock hit an intraday high of Rs. 159.2 and intraday low of 150.4. The net turnover during the day was Rs. 8849671.

Source : Equity Bulls

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