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Innovating products across categories and moving up the ladder

Jyothy Labs Ltd is one of India's leading FMCG companies, established in 1983 with the single brand ‘Ujala’. Over the time, it has evolved into a multi-brand company across different categories, expanding into the manufacturing and marketing of products. The company has diversified into categories such as fabric care, dishwashing, household insecticides, and personal care. Some of its leading brands include Ujala, Exo, Henko, Pril, Margo, Maxo, Mr. White, MoreLight, Neem, and Maya, all of which are well-known and established in their respective categories.

Investment Rationale

Established brand portfolio and market leadership: Jyothy Labs holds a commanding market presence in select brands, led by Ujala's dominant market share in the fabric whitener segment.. They have demonstrated strong performance in Dishwashing with Exo and Pril, while Maxo exhibits significant growth in Household Insecticides, especially in coils. This diversified portfolio and market leadership position provide a solid foundation for future growth, though continuous innovation and marketing efforts are essential for sustaining momentum.

Strong financial position and growth trajectory: In FY24, Jyothy Labs experienced notable revenue growth, primarily due to higher volumes and slight price adjustments. Over the past four years, the company has maintained consistent revenue growth, supported by volume increases and commodity price trends. A major contributor to this growth was the significant decline in raw material costs, which greatly improved profitability margins. Jyothy Labs showed substantial margin gains in its Fabric Care and Dishwashing segments, reflecting efficient management and stronger profitability. The company also maintains a solid financial position, staying net debt-free with only minimal lease obligations.

Extensive distribution network and market reach: Jyothy Labs has established a robust distribution network, making its products accessible in over 2.8 million retail outlets through a vast network of over 9,900+ channel partners. They directly reach 1.2 million outlets, strategically focusing on expansion into new geographies. The company's adoption of innovative sales models, like van and moped sales for rural areas, coupled with the digitization of rural distribution, further strengthens its market penetration

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 15.7%/17.3% CAGR over FY24-26E. Hence, We have Buy rating on the stock by to arrive at a target price to Rs 624.

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SEBI Registration number is INZ000174330