Jyothy Lab - Q4FY21 First Cut - ICICI Direct

(CMP - Rs. 151, MCap - Rs. 5,533 crore)

Jyothy lab posted disappointing set of results with 27.2% sales growth considering base quarter sales decline was 24%.

Q4FY21 Earnings Summary

- Standalone Revenue grew by 27.2% led by 33.2% growth in dishwashing segment, 38.4% growth in personal care & 35.8% growth in household insecticides business. Fabric care business which includes flagship brand 'Ujala' grew at a slower pace at 15.8%. The strong was mainly on account of low base quarter where company witnessed 24% sales decline. The slower growth was mainly due to 10 days reduction in inventory levels at the trade channel. The company is actively enhancing its rural reach by extensively adding sub-stockist

- Gross margins remained at similar levels despite sharp increase in crude based raw materials. However, with the savings of 122 bps in employee spends, 121 bps savings in marketing spends & 95 bps savings in other overhead spends, operating margins expanded by 368 bps to 14.3%. Operating profit grew by 71.2% to Rs. 69.8 crore. The high growth was mainly due sharp contraction in operating margins in base quarter

- Net profit grew by 1.1% to Rs. 27 crore with Rs. 23.5 crore exceptional expense due to reversal on write back of excise duties of previous years. After excluding the one-off expense, net profit grew by 89.2% to Rs. 50.5 crore. The company is net debt free & holding a net cash of Rs. 77 crore as against net debt of Rs. 254 crore in the corresponding quarter

Though, the current quarter sales growth seems to be disappointing, the annual growth of 11.6% in an pandemic year has been encouraging. The company was benefited by strong rural growth during the year. The company's product portfolio is largely concentrated in Southern states & rural regions. We believe second wave of pandemic would continue to benefit the company with sustained growth momentum in dishwashing & household insecticide business. However, fabric wash business is likely to remain impacted for second consecutive year. We believe increasing distribution network specifically in rural regions would drive the growth for the company. The company's operating margins is ~16% which is far below compared to the peers in similar categories. Jyothy lab also present in highly penetrated categories with large peer competitors. These factors makes it difficult to grow at a sustainable pace.

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

Shares of JYOTHY LABS LTD. was last trading in BSE at Rs.150.7 as compared to the previous close of Rs. 149.1. The total number of shares traded during the day was 170403 in over 2773 trades.

The stock hit an intraday high of Rs. 154 and intraday low of 142.95. The net turnover during the day was Rs. 25628740.

Source : Equity Bulls

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