Buy On Declines - Jyothy Laboratories - Way2Wealth

Jyothy Laboratories Ltd. (JLL) reported a 26.6% growth in topline to Rs 150.8 crores while net profit has gone up by 16.8% to Rs 25.7 crores. The margins of its Soaps & Detergents segment declined 710 bps to 26.8% due to higher raw material prices. Its Home Care business performed well with its margins more than doubling. The overall operating margins for the business declined 210 bps to 22.2%.

We continue to maintain our bullish view on the Company. We see multiple growth drivers namely Ujala Techno Bright Detergent (Sachin Tendulkar signed in as the brand ambassador) which it plans to rollout in other states, Maxo for Indian Military (Rs 60 crores revenue expected in FY12), Maxo Safe & Soft which is based on DEPA technology (expected to contribute significantly by FY12) and the laundry business which is expected to breakeven by March 2011 and will be followed by its national launch. For FY11, the management expects Ujala to grow by 25%, Exo to see 30-35% growth on a conservative basis and Maxo is expected to grow by 23%. The managements has recently raised money through QIP issue for inorganic growth mostly in fabric care category.

At the current prices of Rs 277, the stock is trading at a PE of 17.6x and 15x its FY12E and FY13E EPS of Rs 15.8 and 18.5 respectively which is still cheap compared to its peers. We believe that Jyothy Labs will soon command multiples similar to its peers in the FMCG space. Giving a multiple of 22x to its FY12 EPS, we have arrived at a target price of Rs 347 for a medium term perspective. Buy on any declines.

Source : Equity Bulls

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