Jyothy Lab posts soft Q4FY22 numbers

News: Jyothy Lab posted soft Q4FY22 results with 18.6% de-growth in operating profit. Revenue witnessed a growth of 10,3% to Rs 537.4 crore led largely by pricing growth. The company has taken price hikes to pass on inflation in crude & palm based raw material. Fabric wash segment (Ujala & Henko) saw 18% revenue growth whereas dish-washing (Exo & Pril) witnessed 12.2% growth during the quarter. Personal care segment (Margo, Neem & Fa) saw 11.7% sales growth during the quarter. Household Insecticide segment saw 9.1% de-growth in sales during the quarter on a high base.  There has been an incessant commodity inflation in last one year. Caustic Soda, PET bottle, Crude Palm Oil, LAB (Linear Alkyl Benzene) prices are up 149%, 28%, 26% & 10% respectively. Gross margins continue to remain under extreme pressure with 501 contraction in Q4. The company was able to save 63 bps in marketing spends & 47 bps in overhead spends during the quarter. Operating profit was down by 18.6% to Rs56.8 crore. operating margins contracted by 375 bps to 10.6% in Q4. Net profit witnessed a growth of 42.9% to Rs38.5 crore given base quarter included one off spend of Rs23.5 crore. The company proposed a dividend of Rs2.5/share.

Views: Jyothy lab has been adversely impacted by inflation in crude based derivatives from last three quarters. The company has not taken price hikes to pass on entire commodity cost. Moreover, similar to other FMCG companies, Jyothy has also seen pressure on volumes as rural consumers are down trading to the economy brands or smaller SKUs. Though, the company has slightly increased its advertisement spends in FY22, it is still not insulating volumes. We believe the company is worst impacted by raw material price inflation among FMCG companies given its competition with FMCG behemoth & high concentrate of crude based commodities in its raw material basket.  We remain cautious on future growth outlook & margin territory. We will be coming out with detailed report post conference call with the management.

Impact: Negative