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Short-term pressures, long-term promise

Jyothy Labs (JYL IN) posted a 6.4% volume growth in FY25, though this was weighed down by weak performance in the household insecticide and personal care segments. The growth outlook remains uninspiring in the near term, with urban demand facing headwinds and rising competitive pressure in detergents and dishwashing. However, the recent 5% correction in the stock in the past three months offers a modest upside. As a result, we retain Accumulate but lower our TP to INR 390 (from INR 450), valuing the stock at 35x (down from 38x) FY27E P/E, factoring in the muted near-term growth visibility

Weakness in Household Insecticides and Personal Care segments drags performance: JYL reported a muted revenue growth of 1.1% YoY to INR 6.7bn, 1.9% below our estimates, with 4% volume growth YoY in Q4. The value-volume gap resulted from increased grammage and promotional price-off in key categories of dishwash and fabric care. Urban (60% of sales) remained weak for JYL, which more than offset the better performance in rural. Segmentwise, performance was weighed down by the personal care segment, down 8.8% YoY primarily due to a high base and overall softness in the segment. The Household Insecticides (HI) segment contracted 4.8% YoY, due to weakness in coils partially offset by healthy growth in Liquid vaporizer (~50% contribution to HI). However, growth in fabric care segment, up 2.1% YoY, was aided by strong growth in liquid detergent. Dishwashing segment, up 3.1% YoY, supported overall growth.

Near-term headwinds; expect better H2FY26: External headwinds in India such as persistent inflation, reduced discretionary spending, and overall economic uncertainty are straining urban consumption leading to downtrading, holding back on bulk purchase and heightened price sensitivity. To combat this, JYL’s strategy is focused on: 1) launching more affordable formats, 2) filling white spaces in the portfolio, 3) expanding reach and 4) managing costs. Management expects near-term headwinds due to subdued urban consumption and heightened competition. In FY26, JYL expects to deliver volume growth in mid-single digit in H1 and double-digits in H2.

Input cost inflation to weigh on H1FY26 profitability: EBITDA margin improved by 36bps YoY to 16.8%, above our estimates of 16.1%, due to: 1) lower advertising spends, 2) effective cost management, and 3) selective price hikes across key categories. The management aims to sustain its media spends at 8.5-9% of sales in the near-to-medium term. While it expects H2 margins to be maintained at 16-17%, H1 margins are likely to remain under pressure due to subdued demand and elevated input costs.

Reiterate Accumulate with a lower TP of INR 390: We cut our EPS estimate by 4.3%/7.1% for FY26E/FY27E to factor in lower revenue and margin due to softness in urban demand and competitive intensity in detergents and dishwash. We reiterate Accumulate with a lower TP of INR 390 (from INR 450) based on 35x FY27E P/E (from 38x) amid muted demand scenario.

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