MOSL: JYOTHY LABORATORIES (Neutral)-Steep material cost increase drives big profit miss
JYOTHY LABORATORIES: Steep material cost increase drives big profit miss
(JYL IN, Mkt Cap USD0.8b, CMP INR158, TP INR160, 2% Upside, Neutral)
- Sales came in above our expectation in 2QFY22. Gross/EBITDA margin was significantly lower than our estimate due to a greater material cost impact and higher-than-anticipated ad spends. No respite is expected in material cost inflation, affecting performance in subsequent quarters as well.
- Topline growth is key for a company with sales of just INR19b. The likelihood of consistent 15% sales growth (essential for any re-rating) continues to appear difficult. Sales CAGR has been 3.7% for the preceding five years.
- With margin likely to remain under pressure due to material cost increases, earnings growth prospects remain weak. We maintain our Neutral
Double-digit volume growth continues, high input cost impacted profitability
- Standalone net sales grew 15.7% YoY to INR5.8b (in line) in 2QFY22.
- Gross margin fell ~780bp YoY to 39.7%. As a percentage of sales, greater RM cost (+780bp YoY), higher ad spends at 7% (+100bp YoY), lower staff cost at 10.2% (-160bp), and lesser other expenses at 11%(-100bp) led to an EBITDA margin contraction of 620bp to 11.6%.
- EBITDA declined by ~25% YoY to INR671m (est. INR 820m). PBT fell ~29% YoY to INR500m (est. INR637m). Adjusted PAT declined by ~31% YoY to INR421m (est. INR523m).
- Sales/EBITDA/adjusted PAT growth was 19%/-21%/-26% YoY In 1HFY22.
- Consolidated segmental performance: Fabric Care/Dishwashing/Household Insecticides/Personal Care grew by ~25%/13%/4%/5% YoY to INR2.1b/INR2.2b/INR628m/INR661m in 2QFY22.
- Margin for Fabric Care/Dishwashing/Household Insecticides/Personal Care contracted by ~590bp/830bp/nil/1,040bp YoY to 16.2%/11.3%/(5.6%)/15% in 2QFY22
Jyothy Labs Limited, formerly Jyothy Laboratories Limited, is a multi-brand, multi-product company focused on fast-moving consumer goods industry. The Company is principally engaged in manufacturing and marketing of fabric whiteners, soaps, detergents, mosquito repellents, scrubber, bodycare and incense sticks. It operates through three segments: Soaps and Detergents, which includes fabric whiteners, fabric detergents, dish wash bar and soaps, including ayurvedic soaps; Home Care products, which includes incense sticks, scrubber, dhoop and mosquito repellents, and Others, which includes bodycare, tea and coffee. It products are under various brands, which include Henko, Mr. White, Ujala, More light, Chek, Pril, Exo, Maxo, Margo, Fa, Neem, Fabric Spa, Snoways, Busy easy and Wardrobe. Its subsidiaries include Jyothy Consumer Products Marketing Limited, Four Seasons Drycleaning Company Private Limited, Snoways Laundrers & Drycleaners Private Limited and Jyothy Fabricare Services Limited.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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