[T.S.R:16762] Sell Jyothy Labs With A Target of Rs 170

Jyothy Labs reported weak 3QFY11 results, with net profit growing only 0.3%. Home Care revenue declined 11%, registering losses. With lack of clarity on acquisitions, we expect the stock's price performance to remain muted. 

n       Home Care reports revenue decline. The company reported revenue growth of 11% yoy, of which 6% comprised volume growth and the remaining price hikes. The soaps & detergents segment registered revenue growth of 21%, but the homecare segment saw revenue decline of 11% post cut in trade margin.

n       Higher ad spend impacts margin. The company's EBITDA margin was lower 230bps yoy. Increase in ad spend after launch of detergents and aggressive brand building activities impacted the margin. Net profit was up only 0.3%. The company's other income was higher as it has free reserves post its QIP.

n       No firm acquisitions plans. The company had raised Rs2.3bn as QIP for acquisitions. However, it indicated that it is not able to close the deals and has invested the QIP money in bank deposits. Also, it is looking to raise Rs1bn in its 75% subsidiary - Jyothy Fabricare Services - to fund its capex plans.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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