Jyothy Labs Q2 Review - Steep Material Cost Increase Drives Big Profit Miss: Motilal Oswal

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Motilal Oswal Report

Jyothy Laboratories Ltd.'s sales came in above our expectation in Q2 FY22.

Gross/Ebitda margin was significantly lower than our estimate due to a greater material cost impact and higher-than-anticipated ad spends.

No respite is expected in material cost inflation, affecting performance in subsequent quarters as well.

Topline growth is key for a company with sales of just Rs 19 billion. The likelihood of consistent 15% sales growth (essential for any re-rating) continues to appear difficult.

Sales compound annual growth rate has been 3.7% for the preceding five years.

With margin likely to remain under pressure due to material cost increases, Jyothy Labs' earnings growth prospects remain weak.

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