ICICI Direct is bullish on Jyothy Laboratories has recommended buy rating on the stock with a target price of Rs 520 in its research report dated May 17, 2018.
ICICI Direct's research report on Jyothy Laboratories
Jyothy Labs (JLL) posted robust revenue growth of 11.6% (GST comparable growth of 16.7%) to Rs 505.4 crore led by 11.4% volume growth, well supported by healthy growth across categories Power brands Ujala, Exo, Maxo, Henko, Margo and Pril saw strong growth of 13.7%, 21.3%, 8.7%, 19.5%, 59.3% and 24.1%, respectively Operating margin improved 344 bps to 17.9% mainly on the back of 720 bps surge in gross margins. A&P spend increase of 90% to Rs 53.1 crore is part of the company’s strategy to increase advertisements in power brands specifically in Henko & Margo JLL had adjusted tax losses of Rs 65.6 crore in Q4FY17 on account of approval of merger of Jyothy Consumer Products Marketing with JLL. This led to tax reversal. Hence, reported PAT was lower 45.1% YoY to Rs 60.4 crore. JLL reported other income of Rs 22.1 crore vs Rs 4 crore in the base quarter, positively impacted by Rs 37 crore profit on sale of land.
Outlook
We are confident on the back of the company’s strong performance in back-to-back quarters and believe dishwashing products Exo & Pril and natural product like Margo provide a growth opportunity in their respective space. Thus, we maintain our BUY recommendation on the stock with a revised target price of Rs 520 /share.
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