Buy Jyothy Labs Ltd For Target Rs.345 - Geojit Financial Services Ltd
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We recently had an interaction with Mr. Sanjay Agarwal, CFO of Jyothy Labs, about recent developments at the company. Here are the key takeaways:
* The company plans to further expand in the personal care category. Currently, JYL derives 45% of its revenue from fabric care, 35% from dishwashing products, 10% from household insecticides, and the remaining 10% from personal care items.
* The southern region accounts for 40% of JYL’s total business, while the remaining 60% is distributed across three other markets. Among the remaining three regions, the eastern market constitutes the largest share followed by the northern and western markets.
* Looking ahead, JYL is optimistic about 1HFY24 but expects challenges in the second half due to rising commodity and crude oil prices. Currently, 60% of the company's market is in urban areas, which are performing well. The remaining 40% in rural areas is expected to see growth in the coming years.
* The company aims for double-digit growth in FY24, mainly driven by increased sales volume. It also targets operating margin in the range of 15- 16%. Ad expenses are expected to remain within the 7-8% range.
Segmental Information
Fabric Care
* The premium product line in fabric care, known as ‘Henco’, is well-received in the market and is priced around INR150-200 per kg. The company also offers mid-priced options under the ‘Ujala IDD’ brand, which are sold at around INR120 per kg and cater to markets such as Kerala and West Bengal. Additionally, it has budget-friendly options like ‘Mr. White’ and ‘More Light’, which are priced at about INR80-100 per kg.
* In 2012-13, the company successfully acquired Henkel, the renowned manufacturer of popular brands like Pril, Mr. White and Henko. At the time of acquisition, Henkel was operating with a margin of -5%, but through efforts, the company has transformed it into a profitable venture, boasting an impressive margin of +14-15%.
Dishwashing
* In the dish wash division, JYL has two primary brands, ‘Pril’ and ‘Exo’. Pril is positioned as a premium product, while Exo caters to the economy segment. Both brands hold a market share of ~14-15% in the INR50bn segment. To reach rural areas, it has introduced ‘Exo bar’ priced at INR5-10, offering an affordable option to consumers. It is worth noting that the category has a penetration rate of only 40-50% due to traditional methods like using ash and sand.
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