Zero Debt FMCG Stock Is Top Pick of The Week By Axis Securities; Here’s Why

Having started off as a single product manufacturer and distributor, Jyothy Labs Ltd (JLL) has grown to become a well-known brand in the FMCG industry since its founding in 1983. Through well-known brands including Ujala, Henko, Mr. White, Pril, Exo, Margo, and Maxo, JLL, a debt-free company is active in a number of market categories today, including fabric care, dishwashing, household chemicals, personal care, and laundry services. The stock has been selected as a top pick of the week by the brokerage firm Axis Securities for a target price of Rs 475. Here's why.

Investment Rationale For Jyothy Labs According To Axis Securities

JLL is embracing the transformation for the next leg of growth: The company's recent initiatives, implemented over the last couple of years, have begun yielding 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 1.1 Mn outlets. It intends to enhance its on-the-ground execution through its dedicated team of 3,000 sales representatives and streamlining the distribution channel. These efforts signify steps in the right direction for achieving long-term sustainable growth.

Room for margin expansion: We expect the company's EBITDA margin to be in the range of 16-17% for FY24-26 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 rationalization measures.

Jyothy Labs Share Price Target

"We expect the company to deliver healthy Revenue/EBITDA/PAT growth of 14%/30%/31% CAGR over FY23-26E respectively which will elevate the company's overall return profile. We expect its ROE to increase from 15% in FY23 to 23% in FY26. At CMP, the company is currently trading at 34x/29x its FY25/26 EPS and with a better earnings growth visibility and return profile, the stock appears attractive in the Small to Midcap Consumer space. We recommend a BUY rating on the stock with a TP of Rs 475/share, implying an upside of 10% from the CMP," said Axis Securities in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.