Geojit Financial: Jyothy Labs Set for Strong Growth, Target Price Raised to ₹645

Geojit Financial Services has given an “Accumulate” rating for Jyothy Labs, with a new target price of ₹645, up from ₹478, according to their research report from August 13, 2024.

Why the Optimism?

Jyothy Labs, an Indian FMCG company known for products like fabric care, dishwashing, and personal care, continues to perform well. For Q1FY25, their revenue grew by 8% year-on-year (YoY), driven mainly by an 11% increase in sales volume. The fabric care and dishwashing segments, which make up 77% of their total sales, grew by 9% and 7% YoY, respectively. Personal care and household insecticides also saw growth.

Strong Margins Despite Higher Ad Spending

The company’s operating profit rose by 14% YoY, helped by a 3.4% increase in gross margins, reaching 51.3%. Despite increasing their advertising spending by 22% YoY, their EBITDA margin still improved by 0.9% YoY to 18%. Jyothy Labs isn’t planning to raise prices but is focusing on increasing sales volumes with a target margin of 16%-17%.

Looking Ahead

The company is benefiting from rising rural demand, aided by good monsoon conditions and government initiatives. Geojit expects Jyothy Labs’ revenue and earnings to grow at an 11% and 15% compound annual growth rate (CAGR) from FY24 to FY26. The company’s strong balance sheet and cash flow are also positive signs.

Considering the healthy revenue growth and strong margins, Geojit has raised the target price for Jyothy Labs to ₹645 and recommends accumulating the stock.