Jyothy Labs shares hit 52-week high on strong Q1 numbers; Sharekhan keeps ‘Buy’

Sharekhan maintains a Buy recommendation on the stock with a revised price target of Rs 340.

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Jyothy Labs share price touched a 52-week high of Rs 312.15, rising 7 percent on July 26, a day after company reported strong numbers for the quarter ended June 2023.

On July 25, Jyothy Labs reported a consolidated net profit of Rs 96.25 crore for the quarter ended June, up 101.6 percent from Rs 47.73 crore recorded a year ago.

The company reported a 15 percent year-on-year (YoY) rise in consolidated revenue from operations at Rs 687.10 crore against Rs 597.20 crore year ago.

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Operating EBITDA is at 17.1 percent (Rs 117.4 crore) versus 10 percent (Rs 59.8 crore) in the same period last year, an increase of 96.3 percent, the company said in an investor presentation.

Brokers’ View

According to broking house Sharekhan, the company started FY2024 on a strong note with broad-based growth across key categories. It was eleventh consecutive quarter of double-digit revenue growth and fourth consecutive quarter of sequential improvement in the OPM.

Product innovation and availability of relevant product assortment for general trade/e-commerce/modern trade and distribution expansion will help company to continue to gain market share in key categories, as per Sharekhan.

The stock has seen good run-up in the recent times and is trading at 32.9x/27.5x its FY2024E/25E earnings, which is at discount to the valuation of some of the mid-large consumer good companies. Improving cash flows, focus on sustaining double-digit revenue growth with decent volume growth and strong earnings visibility make it a good mid-cap pick in the consumer goods space.

The broking house maintain a Buy recommendation on the stock with a revised price target of Rs 340.

Some concerns

Motilal Oswal raised its EPS Estimates for FY24/FY25 by 8 percent/ 5 percent. For a company that had lower sales of Rs 24.9b in FY23, its performance over the past five years has been consistently lacklustre (at 8.3 percent/ 4.2 percent sales/operating profit CAGR).

Despite healthy EBITDA growth in 1QFY24, company’s EBITDA CAGR for the three years and five years ending in FY24 is expected to remain in single digits. Despite assuming consolidated EBITDA margins close to their peak level in FY25, RoE remains lower than peers’ at ~21 percent.

It does not expect a major rerating anytime soon and reiterated its Neutral stance on the stock with a Target Price of Rs 305.