ICICI Direct is bullish on Jyothy Laboratories has recommended buy rating on the stock with a target price of Rs 240 in its research report dated December 26, 2018.
ICICI Direct's research report on Jyothy Laboratories
JLL launched 100% natural and chemicals free incense stick - Maxo Agarbatti in Q2FY19. The mosquito repellent incense stick category has posted 101% revenue CAGR in last three years with a size of Rs 385 crores (YTD CY18). The market currently consists of hundreds of local brands of which many are illegal/unorganised and use harmful pesticides. With high growth and huge popularity being witnessed in this segment, we believe JLL has made the right move to capture the opportunity by foraying into this category. JLL is also looking to extend its heritage brand Margo to facewash and handwash segments. In addition to new launches, JLL is eyeing an acquisition in FY20 to the tune of Rs 1,000 crore to achieve its target of reaching Rs 4,000 crore topline by FY21. JLL’s planned expansion in the hair care segment in the Ayurveda space is expected to enhance its revenue from the personal care segment in the foreseeable future.
Outlook
With its brand building strategies, effective distribution network and operational efficiencies, we estimate JLL’s margins for FY19E, FY20E, FY21E at 16.1%, 16.3%, 17.1%, respectively. We expect revenue CAGR of 10.5% for FY18-21E. The long term growth story of the company on account of an increase in penetration (for dishwash, house insecticide, naturals products) and premiumisation remains intact. We are confident on the back of new launches in high growth areas along with positive volume led growth and believe dishwashing products Exo & Pril along with natural products like Margo provide a growth opportunity in the respective space. Thus, we maintain our BUY recommendation on the stock with a revised target price of Rs 240/share.
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