Jyothy Laboratories : Margin To Gain Amid Revenue Volatility
Reco : Hold Cmp : 182 Target : 165
Jyothy Labs (JLL) reported better than expected standalone revenue growth of 15% to Rs 1.8 bn (vs. our estimate of 9%) aided by inter-company sales to Henkel India (now JCPL*). But revenue growth was lower than 40+% growth witnessed in the past two quarters due to rationalization of trade margin across its product portfolio. However, EBITDA margin expanded 770 bps YoY to 12.5% (vs. our estimate of 9.5%) driven by (a) price hikes, (b) benefits of trade margin rationalization, and (c) lower input costs in Q2. Consequently, adj. PAT grew 22% to Rs 153 mn, well ahead of our and street estimates.
Revenue growth could be volatile in near term as JLL continues to pursue aggressive cost rationalization and make its backhand (manufacturing, supply chain etc.) leaner. Hence, we marginally reduce our FY13 standalone revenue growth estimate to 26% (vs. 28% earlier). However, we are optimistic of pick up in revenue growth in FY14 after completion of cost rationalization initiatives.
Revenue growth could be volatile in near term as JLL continues to pursue aggressive cost rationalization and make its backhand (manufacturing, supply chain etc.) leaner. Hence, we marginally reduce our FY13 standalone revenue growth estimate to 26% (vs. 28% earlier). However, we are optimistic of pick up in revenue growth in FY14 after completion of cost rationalization initiatives.
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