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Jyothy Labs Ltd is one of the leading Indian FMCG Companies founded in 1983 with a single brand ‘Ujala’. Over the years, it evolved into multi brands and different categories as well as started manufacturing and marketing of products. It evolved into categories such as Fabric care, Dishwashing, Household Insecticides and Personal care while some of its leading brands includes Ujala, Exo, Henko, Pril, Margo, Maxo , Mr. White, MoreLight, Neem, and Maya which are well-known and established brands in their respective categories.

Undisputed leader in Fabric care with Ujala brand while other products brand catching up: Jyothy Labs is an undisputed leader of Ujala brand with market share of ~84% and the company is continuously focusing on driving growth for its brand and Fabric care segment by innovating products, increasing spends for marketing and distribution activity. Besides, it ranks 2nd (value) for Pril Liquids and Exo Dishwash and 2nd (volume) for maxo mosquito repellent coil. Further, the company has also innovated product brands such as Margo, Henko, T-Shine which is gaining traction. Going ahead, the overall plan is to drive volume led growth by optimizing portfolio, improving demand from rural & urban areas and investing in R&D and advertising activities. So, all these efforts will aid Jyothy Labs to strengthen the core, add value from newly introduced products as well as gain market share

Segmental growth to be led by Fabric Care & Dishwashing: The company’s majority of the revenue came from soaps & detergent (65%) and Home care (32%) segments till FY16. Post that the company decided to restructure its revenue stream and now it has divided segments into fabric care (42.5%), Dishwashing (34.8%) followed by personal care (10.2%) and Household Insecticides (8.5%), laundry and others (hold 2% each). Additionally, it earns majority (i.e. 99.7%) of the profits from Fabric Care and Dishwashing segments. Further these two segments are growing at 17.9% and 17.5% CAGR over the last 3 years and this double digit growth is expected to continue driven by increasing demand for new categories such as liquids soaps & detergent, post wash products, etc. Along with it, the plan is to strengthen the portfolio by innovating products, positioning products across markets as per demand and focus on expanding distribution reach.  

Investment in distribution & marketing activity to boost growth: The company is taking constant efforts towards brand building, increasing distribution reach by further strengthening direct reach, rural footprint and use of digital technology to enhance sales efficiency. Besides, its focus is on marketing activity wherein the company has selected well-known celebrities for campaigns which would create confidence amongst consumers. So, all these efforts will aid Jyothy Labs to gain market share, improve top line growth as well as margins.

Outlook & Valuation: We believe Jyothy labs has come a long way by innovating products across categories, investing on advertisements & promotional activities and gaining market share. Going ahead, the management aims for volume led growth and at the same time maintain margins. Additionally, they want to invest behind brand building initiatives, manufacturing and strengthen distribution reach in rural areas as well as grow digitally. We are optimistic on the growth prospect of the company and estimate its Revenue/EBITDA to grow at 15%/37% CAGR over FY23-25E. We initiate a Buy with a target price of Rs 428, valuing the company near to its 10 years average P/E of 32.7x.

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