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Jyothy Laboratories Ltd.’s Q1 FY22 sales came in above expectations, despite a higher Covid-19 impact in the company’s largest market, i.e., Kerala.
Nevertheless, gross and Ebitda margins were significantly lower than expectations due to a higher material cost impact and higher-than anticipated ad spends.
Material cost inflation is unlikely to see any considerable respite, affecting performance in subsequent quarters as well.
While improvement was seen in net working capital days in FY21 and Jyothy Labs is now net debt free, topline growth is key for a company with sales of just Rs 19 billion.
The likelihood of 15% sales growth (essential for any re-rating) continues to appear difficult.
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