Jyothy Lab shines bright

Shares of Ujala fabric whitener maker Jyothy Laboratories are up 3.6% at Rs. 190, after posting a ‘comeback’ sort of financial performance for June 2014 quarter, with consolidated revenues rising 7% QoQ to Rs. 385 crore, but net profit nearly doubling to Rs. 42 crore from Rs. 21 crore in Q4FY14. Q1 net profits would be higher by Rs 2.1 crore, but for the new depreciation rates mandated by new Companies Act 2013. Q1 EPS stands at Rs. 2.35, versus Rs. 4.77 for FY14.   

Revenue growth came in mainly from the soaps and detergent segment, partly aided by launch of innovative and premium product like Henko Lintelligent, being endorsed by Bollywood celebrity Madhuri Dixit while Shilpa Shetty was roped in as the brand ambassador for Exo.  

Continued focus on R&D and focused efforts on margin improvement help the company, with a bouquet of 10 brands like Ujala, Henko, Exo, Pril, Margo, Mr. White, Chek, Maxo, Fa, Neem, strengthen margins in the soaps and detergent category, accounting for nearly 80% of revenues, to 15.7% from 12.8% in Q4FY14. Net margins, on the other hand, have jumped to 11% in Q1 from 6.2% in FY14 and sub 2% in FY13. Lower advertising spend (10.9% of sales vs 12.3% in Q4FY14) and tight control over material cost (52% of sales vs 56% in Q4FY14), helped augur margins.

At current market price of Rs. 190, share trades at a PE multiple of 20 times its currnet year earnings, which is among the cheapest in the FMCG space. An excellent Q1 show is only an icing on the cake!