Jyothy Lab - Q1FY22 First Cut - ICICI Direct

(CMP - Rs. 170, MCap - Rs. 6263 crore)

Jyothy Lab posted dismal set of numbers with 16.9% dip in operating profits & 20.5% decline in net profit.

Q1FY22 Earnings Summary

- Standalone revenue grew by 21.8% to Rs. 521.9 crore on the back of low base quarter. The company saw 4.1% growth in base quarter impacted by Covid-19 induced lockdown. Dishwashing segment witnessed 22% sales growth despite strong growth in base quarter. Both the brands in dishwashing categories i.e. Pril & Exo are growing on a sustainable pace. Fabric care segment saw 27.4% growth on the back of extremely weak quarter. Detergents & Fabric whiteners category has been impacted by lack of mobility due to pandemic disruptions. Household Insecticide (HI) & Personal care segment grew by 12.7% & 13.5% respectively

- With the surge in commodity prices (Palm Oil, Crude based packaging cost), gross margins have contracted by 281 bps. Marketing spends increased by 360 bps given the company cut down the ad-spends in base quarter. Employee & Overhead spends largely remained same. Operating profit declined by 16.9% to Rs. 65 crore & operating margins contracted by 580 bps to 12.5%

- Net profit de-grew by 20.5% to Rs. 40.1 crore with similar dip in operating profit

Jyothy lab is present in fabric wash, dishwashing, Personal care & HI categories, where it is facing direct competition with HUL, Godrej Consumer (behemoth in respective categories). We believe the Jyothy lab would only be able to grow at moderate pace with the limited possibility of margin expansion. Moreover, its ad-spends is also lower compared to the industry, which would be drag in expanding in its Non-core markets (other than Kerala & TN). The sharp dip in operating margins during the quarter also proves that sensitivity to commodity price is higher compared to the peers due to its lack of pricing power. We remain cautious on the growth & margins expansion prospects.

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. 170.15 as compared to the previous close of Rs. 171.65. The total number of shares traded during the day was 49536 in over 1426 trades.

The stock hit an intraday high of Rs. 177.4 and intraday low of 169.65. The net turnover during the day was Rs. 8595515.

Source : Equity Bulls

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