Buy This Mid-Cap Stock, Sharekhan Recommends For A Potential Upside of 23.71%

Sharekhan recommends investors buy shares of Jyothy Labs Ltd as it sees a potential upside of nearly 23.71 per cent from the stock. The mid-cap company recently posted a good performance for the March quarter. The company's fourth-quarter results were in line with the stockbroking firm's expectations.

In the research report, the brokerage firm pointed out that Jyothy Labs has remained debt free with cash on books at Rs 283 crore as on March 31, 2023. The company posted a 13 per cent y-o-y growth in revenue to Rs. 617 crores, while operating margins expanded by 432 bps y-o-y to 14.8 per cent. It has resulted in a strong 61 per cent y-o-y growth in adjusted PAT to Rs 59.3 crores.

As per the research report, revenue growth was driven by a 3.3 per cent volume growth and 9.5 per cent price-led growth. Double-digit revenue growth can be attributable to 20 per cent growth in the fabric care business and 12 per cent in the personal care business.

According to the management, the tax rate was higher in Q4FY2023 due to asset sales. However, the company expects the tax rate to remain 20 per cent in the coming 2-3 years. Rural growth lagged urban growth due to inflation but, both urban and rural markets continue to do well as the slowdown is bottoming out. The company intends to focus on rural markets to achieve its long-term growth. The management expects margin expansion to continue and targets to achieve a historical OPM of 15-16% in 1-2 years.

Buy shares of Jyothy Labs
Sharekhan believes that Jyothy Labs' product innovation and availability of relevant product assortment for general trade/e-commerce/modern trade and distribution expansion will help the company continuously gain market share in key categories.

In terms of valuation, the brokerage stated that the stock has corrected by 13% from its 52-week high and is currently trading at discounted valuations of 23.8x/19.8x its FY2024E/FY2025E earnings as compared to some of the large peers. Improving cash flows, focus on achieving double-digit volume growth, and attractive valuations make it a good mid-cap pick in the consumer goods space. We maintain a Buy recommendation on the stock with an unchanged price target of Rs. 240 over the next 12 months.

About Jyothy Labs Ltd
Jyothy Labs is a mid-cap company incorporated in the year 1992 operating in the fast-moving consumer goods space. From manufacturing and selling a single product to a household name in the category, Jyothy Labs has come a long way. It has diversified its operations in the area of fabric care, household insecticide, incense candles, and personal care. The company has created brands like Ujala, Maxo, Exo, Jeeva, and Maya. It has a current market capitalisation of Rs 7,454.34 crore.

Share price movement
The latest closing price of Jyothy Labs Ltd stock is Rs 201.50 per share, down by 0.37 per cent on an intraday basis. Its 52-week high is Rs 222.90 per share and its 52-week low is Rs 142 per share. The share price has rallied by nearly 38.39 per cent within a year while over three years it has increased rapidly by around 89.74 per cent.

Disclaimer:
The stocks have been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.