Jyothy Labs is modernising its retail strategy, by expanding its sales force, selling directly via e-commerce and more.- It also increased its geographic footprint, bringing in the Low Unit Pack (LUP) strategy, which helped clock growth in times of rural slowdown.
- The stock is currently trading at a discount in spite of showing better growth than its peers, say analysts.
The maker of household brands like Pril, Henko, Margo and Ujala has been modernising at a rapid pace and spreading its wings fast and wide.
It’s sending its sales force directly to over 1.1 million outlets compared with 8.5 lakh before Covid. Moreover, it has plans to expand this to 1.2 million by the end of the current financial year.
“Product innovation and availability of relevant product assortment for general trade, e-commerce, modern trade and distribution expansion will help JLL to continue to gain market share in key categories,” says Sharekhan.
It has also doubled its sales force to 3,000 compared with pre-Covid levels. It’s also implementing sales forces automation – app-based order-taking by sales staff vs manual order-taking earlier.
“This increases productivity of sales staff, and ensures that orders taken are fulfilled as the sales staff has visibility of distributor stock while taking orders. Consequently, salience of wholesale has been reduced from around 40% to 35% in recent years,” says a report by IIFL Securities.
Moreover, the volatility it has been seeing in sales growth since FY18 has steadied in the last seven quarters with top line growth staying steadfastly above 10%. The fast-moving consumer goods (FMCG) company has been able to achieve growth despite input price inflation and slowdown in volume growth, especially in rural India.
Apart from its changed quality and quantity of distribution strategy, it has also increased its geographic footprint and adopted a LUP strategy – selling in small packets to counter the stress on buyers due to inflation – which has helped grow its dishwasher category in particular.
Sales growth has been steady over the past two years, and should continue to drive growth in future as well, opines IIFL.
The blockbuster brands
The company, which was set up in 1983, has charted an impressive growth path over the past few decades, evolving from a South-centric, single-product – Ujala – company, to a pan-India player with multiple products across categories.
It was able to retain its leadership position in the fabric whitener category, and occupies the second rank in the dishwasher bar category.
Mr. White, Morelight and Ujala IDD are already ₹100 crore-plus brands each. And the company is now looking to build scale in the fabric care category.
“It expects to achieve double-digit growth in dishwashing in FY24 and gain market share in the fast-growing category. The company aims to strengthen the Margo franchise, which will help increase share of personal care in the company’s portfolio,” says a report by Sharekhan. Margo is a soap brand that the company acquired in 2011.
The company’s overall revenue is expected to grow at a compounded annual growth rate (CAGR) of 13-14% over FY23-FY25, Sharekhan says.
Where’s the growth?
Like most of its peers, the mid-cap stock will also improve its operating margins in the coming quarters. However, stock analysts believe that its margin recovery will be better than its peers, and so will the growth in its top line and bottomline.
What’s also different about this FMCG company is that it’s trading at a discount, unlike its peers. “The stock trades at 23 time FY25 PE (price to earnings ratio), nearly half that of other FMCG companies with similar performance. As consistent performance continues, we believe that this discount will narrow,” said IIFL Securities, which maintains its ‘buy’ rating on the stock with a target price of ₹280.
The stock is currently trading at ₹246 apiece.
Moreover, JLL’s net cash position has swung from negative ₹253 crore in FY20 to ₹283 crore in FY23. Working capital days have reduced from 42 days in FY20 to 29 days in FY23 and have also remained consistent at 27-29 in the last three years.
“With stable working capital management and expected improvement in the profitability, the company is likely to generate high cash in the coming years. With limited capex plan, the company will invest behind improving brand prospects and rewarding shareholders with higher dividend payout,” says Sharekhan.
The brokerage too has maintained a ‘buy’ rating on the stock with a target price of ₹275.
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