Jyothy Labs - Views and investor call takeaways - YES Securities

Mr. Himanshu Nayyar, Lead Analyst - Institutional Equities, YES SECURITIES

- Result Highlights - Revenue up 6.2% (FMCG sales up 7.6% and volume up 8.5%), GMs up 130bps to 47.7%, A&P spends up 6%, EBITDA margins up 70bps to 17.3% and PAT up 12%; growth led by dishwashing (+24%) and household insecticides (+23%) partially offset by decline in fabric care (-12%); NWC reduction of 6 days to 17 days given lower MT and CSD sales; balance sheet becomes net cash.

- Current market scenario - Consumer sentiment has improved but trends yet to settle, consumers focusing on trusted brands, GT and eCom channels doing well while MT and CSD continue to face issues, government support and good monsoons driving better rural demand.

- Execution step up - Enhanced rural coverage via addition of sub-stockists and vans, focus on LUPs of Rs5 and Rs10 and eCommerce (up 1.7x); launch of organic fruit and vegetable cleaner Exo Bioh Fresh; media focus on digital and tactical micro marketing; across the board salary increments and incentives.

- Outlook - Focus remains on core essential and hygiene portfolio, expect sustainable profitable volume-led growth, aggressive media support and geographical expansion, soft input prices and cost optimization initiatives to support margins.

- Segmental performance - Ujala back to pre COVID levels while Crisp n Shine will take more time, Henko under pressure, some price cuts given lower input costs; dishwashing benefitted from increased in-home food consumption and rural push through LUPs; HI helped by media support and consumer focus on prevention; Personal Care (+15%) helped by consumer preference for natural products like Margo.

- Growth and margin sustainability - Expect steady topline growth to continue in 2H despite uncertainty; gross margins should be stable while EBITDA margins can come down (guidance of 15-16% vs 17.5% in 1H) given increased A&P investments.

- Household Insecticides segment - Growth led by a strong and timely season; spurious incense sticks share has come down; focus remains on liquid side (automatic LV machine); coil/LV share is 70:30 currently; still loss-making at EBIT level due to aggressive media spends on increasing liquid share.

- Dishwashing segment - Both Exo and Pril doing well given unique offering and ramp-up in distribution in West and North; trying to upgrade consumers from bar to liquids via liquid launch in Exo.

- Personal care segment - Margins lower due to higher PFAD prices despite strong sales growth for Margo as no price hike taken.

- Rural growth - Aggressive sub-stockist addition, LUPs and increasing brand equity in rural markets is helping; should sustain in the long-term; increasing disposable income in rural is key driver.

- Urban growth - Urban also growing albeit at a much slower pace; consumers buying more larger packs.

- Channel mix - Sales contribution from MT (8%) /eCom (up to 3% from 2%)/CSD (9%) and GT is 80%; wholesale channel has seen some recovery post 1Q.

- LUP contribution - Currently around 25-30% share of LUPs which continues to increase gradually.

- New launch strategy - Will continue with the current strategy of launching products first in Kerala followed by other Southern states and then taking it pan-India if successful.

Shares of JYOTHY LABS LTD. was last trading in BSE at Rs.132.6 as compared to the previous close of Rs. 130.5. The total number of shares traded during the day was 52095 in over 1925 trades.

The stock hit an intraday high of Rs. 134.65 and intraday low of 128.4. The net turnover during the day was Rs. 6869844.

Source : Equity Bulls

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