Jyothy Labs - Sarva Gunn Sampann; HDFC Securities Initiates Coverage With A Buy

HDFC Securities Institutional Equities

We initiate Jyothy Laboratories Ltd. with a high conviction Buy idea, with a target price of Rs 575 (40 times June-26 EPS), as it is one of the few FMCG companies structurally poised for high single-digit volume growth, mid-teen Ebitda growth, and high-teen net income growth. We pencil in revenue/Ebitda/profit after tax compound annual growth rate of 12/16/17% over FY24-27, the second highest amongst our coverage of consumer staple companies.

Our confidence stems from the fact that

1. it operates in categories which have a higher Total Addressable Market and, despite being a challenger brand, is trying to grab a pie of the same via making the product portfolio comprehensive, launching low unit packs, communicating product superiority vs. competition, and providing -for-money offerings;

2. doing basics of FMCG right under new leadership- increasing the distribution network and, at the same time, improving productivity; moving on to Above the Line spends, away from BTL spends; focusing on low unit packs across the product portfolio, so that it aligns with the above-mentioned objectives;

3. competent key management personnel are ensuring smooth execution of the above strategy, which was not the case with the erstwhile management, who were more tuned towards doing M&A transactions.

Reasonable valuations (32 times FY26 earnings per share) provide a significant margin of safety. We call Jyothy Labs sarva gunn sampann – fully versatile and with enough weapons in its armory to combat any challenge.

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