HDFC Securities has included Jyothy Labs Limited (JLL) in its top Diwali stock picks for Samvat 2081. The brokerage recommends a buy range of ₹480-533, with a target price of ₹600 by next Diwali, based on the company’s focus on product mix improvements and strong performance in fabric and personal care categories.
About the Company
Jyothy Labs Limited, one of the leading FMCG companies in India, was founded in 1983 with the iconic brand ‘Ujala.’ Over the years, it has expanded into a multi-brand company with a portfolio that includes Ujala, Maxo, Exo, Henko, Pril, Margo, Mr. White, T-Shine, Neem, Maya, and MoreLight, all leaders in their respective categories. JLL operates through 23 manufacturing plants across India and has a robust distribution network, with 1.2 million direct outlets, 2.8 million overall outlets, and over 9,900 channel partners.
Valuation and Recommendation
JLL has successfully transformed from a promoter-driven entity to a professionally managed, multi-product company with a nationwide presence. Revenue has grown at a 12.7% CAGR between FY20 and FY24, with the company focused on margin expansion through better product mix and operating efficiencies. HDFC Securities expects the company to achieve revenue, EBITDA, and PAT CAGRs of 12%, 15%, and 17% respectively over FY24-FY26. The brokerage recommends buying Jyothy Labs stock within the range of ₹480-533 for a target price of ₹600 (43.75x FY26E EPS).
Key Financials (FY22-FY26E):
- Revenue: ₹2,196 crore (FY22) to ₹3,434 crore (FY26E)
- EBITDA: ₹248 crore (FY22) to ₹633 crore (FY26E)
- EBITDA Margin: 11.3% (FY22) to 18.4% (FY26E)
- Profit After Tax (PAT): ₹162 crore (FY22) to ₹503 crore (FY26E)
- Earnings Per Share (EPS): ₹4.4 (FY22) to ₹13.7 (FY26E)
- Return on Equity (RoE): 11.3% (FY22) to 22.3% (FY26E)
Key Triggers
- Fabric Care Segment: Jyothy Labs’ fabric care segment, driven by the Ujala Supreme brand, continues to perform strongly with a 13.8% CAGR between FY20 and FY24. Ujala Supreme maintains an 83% market share, while new territories are being explored for post-wash products.
- Personal Care Growth: Personal care was the fastest-growing segment for JLL, with 21.1% YoY growth in FY24. The company aims to leverage the Margo brand equity and expand its presence in categories like toilet soaps.
- Investments in Advertising: The company continues to increase its investments in advertising and promotional activities, using digital campaigns and celebrity endorsements to strengthen brand recall and drive sales.
Key Concerns
- Rural Demand Recovery: While there are signs of rural demand recovery, any negative impact from monsoons or general economic conditions could prolong the recovery period, affecting JLL’s growth.
- Inflationary Pressures: High core inflation may impact consumption patterns, with consumers opting for smaller packs and lower-range products, which could affect volume growth.
- Competition and Pricing Pressure: Increased competition from national and regional players, combined with rising input costs, could lead to higher advertising spends and pressure on profit margins.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from HDFC Securities and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
