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Axis Securities Report
Our confidence in Jyothy Laboratories Ltd.'s promising future is underpinned by the company's robust and consistent performance over the last several quarters, driven by a series of strategic initiatives it has undertaken in the recent past. These include:
Scaling up offerings through low unit packs and driving the premiumisation agenda, particularly in detergents and dishwash segments,
Expanding into the larger body wash segment (toilet soap) as opposed to its earlier presence in the niche (natural) segment, thereby broadening its product portfolio,
the management's strategic efforts to expand its direct distribution reach, targeting an increase from the current 1.1 million outlets, in tandem with enhancing on-ground execution through its strong sales force of 3,000 (a threefold increase over FY19) and streamlining the distribution channel.
These initiatives are anticipated to have a long-term positive impact on the company’s performance and should continue to propel its growth in the forthcoming years.
We project the company to achieve robust revenue/Ebitda/profit after tax growth at a compound annual growth rate of 13%/25%/25% over FY23-26E, compared to 13%/3%/5% CAGR over FY19-23.
Furthermore, we anticipate an increase in the Jyothy Labs' return on equity from 15% in FY19 to 21% in FY26. At the current market price, the stock is trading at 32 times/29 times its FY25/26 earnings per share and with a better earnings growth visibility and return profile, the stock looks attractive in the small to midcap consumer space.
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