Jyothy Lab - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 140 MCap - Rs. 5156 crore)

Jyothy Labs posted a healthy set of numbers in a disruptive environment with revenue growth of 4.1% and earnings growth of 40.4%.

Q1FY21 Earnings Summary

- Revenues grew 4.1% led by 6% volume growth. Dishwashing & household insecticide witnessed strong 16.6% & 151.1% growth. Dishwashing segment has seen a strong growth mainly on the back of increasing consumer demand due to heightened hygiene awareness. The higher growth in household insecticide was mainly on account of low base & increased trade inventory at the end of June quarter before the beginning of the season. However, fabric wash segment saw 23.8% decline in sales due to dampened demand conditions for fabric whitener due to reduced 'out of home' activity

- Gross margins contracted 182 bps as the company would not have benefited from low raw material prices due to stocking of old inventory. However, a substantial reduction in marketing spends & cut in other overhead cost led to the operating margins expansion of 233 bps during the quarter. The company reduced the A&P spends by 41% to Rs. 19.8 crore. In terms of percentage of sales, A&P spends were down 350 bps. Net profit witnessed growth of 40.4% largely led by higher operating profit

The company put up a resilient performance in a disruptive times mainly due to filling of trade inventory of household insecticide products before the start of the season & higher sales of hygiene products. Moreover, Jyothy Lab has a strong rural presence, which remain largely insulated from lockdown. We believe the company would have started manufacturing operations quickly within few weeks of lockdown. With the lever of marketing spends, the company was able to protect operating margins. However, we believe the product portfolio of Jyothy lab has always faced stiff competition from large player presence in the category, which has impacted the growth periodically. We are cautious on growth prospects.

We will be coming out with the detailed result update soon.

Shares of JYOTHY LABS LTD. was last trading in BSE at Rs.140.4 as compared to the previous close of Rs. 131. The total number of shares traded during the day was 343025 in over 6005 trades.

The stock hit an intraday high of Rs. 143.75 and intraday low of 132.1. The net turnover during the day was Rs. 47208976.

Source : Equity Bulls

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