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HDFC Securities Institutional Equities
We carried out comprehensive channel checks to better understand medium term demand trends and what went wrong in Q2 FY25, which led to muted volume growth. Our ground checks suggest that Jyothy Laboratories Ltd.'s shall report minimum volume growth of 5-6%+ during Q3 FY25, along with improved profitability on the back of the following:
Management taking an aggressive stance to be one of the meaningful players in the liquid detergent segment as this market transitions from powder to liquid. This is being done by setting the right price architecture and launching relevant SKUs for different channels.
Focus on winning back market share in the dishwashing business by passing higher value to end consumers and offering better trade schemes to customers (retailers).
Taking pricing action in the soaps portfolio to navigate the challenge of higher PFAD prices.
Driving conversion towards liquids from coils in the Household Insecticides segment with an enhanced product proposition.
We continue to maintain a high-conviction Buy with a target price of Rs 600 (40x FY27 EPS), as it could be an outlier amongst our consumer coverage.
However, we have reduced our target multiple from 42 times to 40x, to account for the overall correction in consumer sector multiples and the gradual recovery in FMCG consumption.
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