Sharekhan is bullish on Jyothy Laboratories has recommended buy rating on the stock with a target price of Rs 140 in its research report dated June 05, 2020.
Sharekhan's research report on Jyothy Laboratories
Jyothy Labs (JLL) registered disappointing numbers in Q4FY2020 with revenues and PAT declining by ~24% and 60% (volumes fell by 22%). OPM was down by 550 bps to 10.3% affected by lower operating leverage. Inventory filling of seasonal products such as household insecticides and soaps was affected by the lockdown at the end of March-2020 (impact on revenues and PAT amounted to Rs. 150 crore and Rs. 50 crore, respectively). However with excess inventory, April and May saw sales grew y-o-y despite lower capacity utilisation. The company expects essential categories (fetching 85% of revenue) to perform well. The decline in crude oil prices and stringent cost management would help OPM to stand at 15%.
Outlook
The stock has corrected by ~29% in last six months and is trading at discounted valuation of 21x. In view of discounted valuations and expected recovery in the coming quarters, we maintain our Buy recommendation on the stock with a revised price target (PT) of Rs. 140.
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