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Investment Rationale

A. JLL is embracing the transformation for the next leg of growth – The company's recent initiatives, implemented over the last couple of years, have yielded positive results, and we expect these benefits to extend over the coming years. Notable initiatives include a) Expanding value offerings through LUPs and promoting premiumisation, primarily in the Detergents and Dishwash segments, b) Diversifying into the larger Body Wash segment (Toilet Soap) as opposed to its previous presence in the niche (natural) segment, creating a broader market for the company in the Soap segment, and c) The company's commitment to expanding its direct distribution network, with aspirations to increase its current 1.2 Mn outlets. It intends to enhance its on-the-ground execution through its dedicated team of sales representatives and streamlining the distribution channel. These efforts signify steps in the right direction for achieving long-term sustainable growth.

B. Room for margin expansion – We expect the company’s EBITDA margin to be in the range of 16-17% for FY26 and it will be driven by 1) Improving product mix – scaling up fast-growing premium products and launching a broader portfolio of Toilet Soap, thereby increasing its canvas in the bathing soap market, 2) Improving on-ground execution by selling larger number of products and SKUs that will increase efficiency and throughput across outlets, and 3) Focusing on driving economies of scale and cost rationalisation measures.

C. Decent valuation compared to peers - We expect the company to deliver healthy Revenue/EBITDA/PAT growth of 8%/9%/9% CAGR over FY24-27E, respectively, elevating the company’s overall return profile. We expect its ROE to increase from 15% in FY23 to 18% in FY26. The company is trading at 32x/28x its FY26E/27E EPS at CMP. With a better earnings growth visibility and return profile, the stock appears attractive in the Small to Midcap Consumer space.

D. Improving macroeconomic environment – Recent tax cuts, a favourable monsoon, lower crude oil prices, and supportive fiscal measures are expected to boost the overall consumption sector. However, a near-term risk remains from the rising palm oil prices, which could weigh on margins. F. Recommendation: We recommend a BUY with a near-term TP of Rs 405, implying an upside of 10% from the CMP.

F. Recommendation: We recommend a BUY with a near-term TP of Rs 405, implying an upside of 10% from the CMP.

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