Jyothy Labs — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Jyothy Labs reported a mixed Q3 FY25, with strong volume growth of 8% but lower value growth of 4% due to promotional activities and higher grammages. While gross margins were protected, EBITDA margins saw a 110 bps decline. The company is focusing on diversifying away from the struggling HI segment and expanding other categories, despite a challenging demand environment and competitive pressures. The outlook for Q4 FY25 remains tough.

Highlights

  • Consolidated revenues from operations reached INR704 crores.

  • Volume growth was strong at 8% year-on-year.

  • Gross margin was protected at 49.8% year-on-year.

  • Ex-HI segment volume grew by 10.3% year-on-year.

  • Profit after tax for the 9-month period improved to INR941.1 crores from INR291.2 crores last year.

Concerns

  • Value growth of 4% was lower than volume growth of 8% due to higher grammages and promotional prices.

  • Operating EBITDA margin declined by 110 bps to 16.4% from 17.5% last year.

  • Personal Care segment declined by 3.7% year-on-year in Q3.

  • Home insecticide (HI) segment witnessed a 7.3% degrowth for the 9-month period.

  • Q4 outlook is challenging, with initial signs not encouraging for volume growth.

Key financials

2 periods

Headline

  • Consolidated Revenue
    ₹704 Cr
    YoY +4%
  • Volume Growth
    —
    YoY +8%
  • Gross Margin
    49.8%
    YoY 0%
  • Operating EBITDA Margin
    16.4%
    YoY -1.1%
  • Operating Expenses Growth
    —
    YoY +7.5%

9M

  • Value Growth
    —
    YoY +4%
  • Volume Growth
    —
    YoY +7.2%
  • Gross Margin
    50.4%
    YoY +1.5%
  • EBITDA
    ₹387.7 Cr
    YoY +4.4%
  • EBITDA Margin
    17.8%
    YoY +0.1%
  • Profit After Tax
    ₹941.1 Cr
    YoY +223.1%

What they filed

Q4 FY25: revenue up 1.1%, net profit down 2.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY24Q2 FY24Q3 FY24Q4 FY24Q1 FY25Q2 FY25Q3 FY25Q4 FY25
Revenue687 732 678 660 742 +8%734 +0%704 +4%667 +1%
EBITDA117 135 119 108 133 +14%138 +2%116 −3%112 +4%
Net profit96 104 91 78 102 +6%105 +1%87 −4%76 −3%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Ex-HI Segment
    — Value Growth— Volume Growth
  • Fabric Care
    — Growth
  • Dishwash
    — Growth14.1% Exo Market Share
  • Personal Care
    — Decline
  • Home Insecticide (HI)
    — 9M Degrowth4.5% Contribution to Revenue
  • Ujala IDD Detergent Powder (Kerala)
    24.5% Market Share
  • Rest of Category (excluding HI)
    — Volume Growth

Guidance & targets

Margin

  • Operating EBITDA Margin Margin · next financial year · Medium confidence 16% to 17%
    As of now, we are holding on to our 16%, 17%, but we are closely observing the external trends and our effort in business plans are geared to deliver 16%, but we will let you know as we progress as we get into the next financial year.

    — Pawan Agarwal

Volume-Value Gap

  • Volume-Value Growth Gap Volume-Value Gap · long period of time · High confidence 2% to 3%
    No, it will be a combination of various factors. So the gap between value and volume would not necessarily be as high as you see right now. It will revert to the mean level. So 2% to 3% gap over a fairly long period of time is what we can consider. So that is how it is going to look like.

    — Pawan Agarwal

Volume

  • Q4 FY25 Volume Growth Outlook Volume · Q4 FY25 · High confidence not meaningfully different or superior
    No, it looks challenging. The initial signs in quarter 4 are not very encouraging. So I don't think quarter 4 is going to be meaningfully different or superior. So it's going to be tough.

    — Pawan Agarwal

Market context

  • Volume Growth Volume · long-term · Medium confidence double-digit
    Okay. Prolin, the thing is our ambition is still there to grow in double-digit volume growth, but we are a little cautious here. We'll try our best to be in the double digits, but I don't want to guide you there.

    — MR Jyothy

What to watch in Q4 FY25

Q4 FY25 Volume Growth

Next quarter (Q4 FY25 results)
Current Q3 FY25 volume growth 8%, but Q4 outlook 'challenging'
Target Improvement over Q3, or at least not a further decline

Why it matters

Management indicated a tough Q4, so verifying actual volume performance will be key to understanding demand recovery.

No, it looks challenging. The initial signs in quarter 4 are not very encouraging. So I don't think quarter 4 is going to be meaningfully different or superior. So it's going to be tough.

Risks & concerns

  • Subdued Demand Environment

    high

    The overall demand environment continues to be subdued amid inflationary pressures and muted growth rates in urban India.

    Management acknowledged

  • Challenging Q4 FY25 Outlook

    high

    Initial signs in Q4 are not very encouraging, and the quarter is expected to be tough with no meaningful difference or superiority.

    Management acknowledged

  • Input Price Volatility

    medium

    Input prices are fluctuating, crude prices are fluctuating, creating a highly volatile scenario.

    Management acknowledged

  • Intense Competition

    medium

    The market scenario is very, very competitive and the external environment is not very conducive.

    Management acknowledged, but confident in strategy

Q&A highlights

5 direct
HI Segment Competition and Technology Partial
While the market conditions have been bad, we trust our formulation very well. And it's what do you say. It's a very solid formulation. And now only we are in this space, and I have a lot of confidence in our formulation. It's the coil segment that has degrown for us. If you see year-on-year, we are at good double-digit growth in the Liquids segment.

Analyst questioned the company's competitive position and sharper decline in HI despite a new technology from a market leader, prompting management to defend its formulation and highlight growth in the liquids segment of HI.

Asked by Abneesh Roy

Dishwash Segment Growth and Volume-Value Gap Direct
Yes. For us, the liquid has grown in double digits. While the bar segment has grown decently, and we also have scrubbers here. So it is a mix of all of these categories... if you see the major volume growth is what we have achieved in the segment. It's the we have given more grammages.

Analyst probed the low overall 3% growth in Dishwash despite market leader's high single-digit growth, leading management to clarify that liquid dishwash grew double digits and overall volume was driven by grammages.

Asked by Abneesh Roy

Jovia Beauty Soap Launch Strategy and Market Positioning Direct
Yes. So Jovia, we have launched in the mass segment, Vishal. And where it is the bundle pack that goes, right? And we have differentiated with Vitamin E and the pricing is very competitive. And this is -- obviously, you're seeing down trading across categories that is happening. And we want to also explore that segment.

Analyst questioned the rationale for entering the mass segment with Jovia, given the cluttered market, and management explained it as a strategic move to capture the down-trading consumer segment with competitive pricing and differentiation.

Asked by Vishal Gutka

Capital Allocation for New Launches vs. Existing Brands Partial
I believe in building for the future, and that's where the launches play. Today, we need to have certain play in these categories. And hence, we are launching, and this will be the future growth. So we are just seeding in with all these new launches that will be coming.

Analyst questioned the management's strategy of launching many new products (Jovia, racket) while also focusing on liquid detergents, asking if they would cut underperforming products like HI coils, highlighting potential bandwidth and resource allocation challenges.

Asked by Prolin Nandu

Volume-Value Growth Gap Sustainability Direct
No, it will be a combination of various factors. So the gap between value and volume would not necessarily be as high as you see right now. It will revert to the mean level. So 2% to 3% gap over a fairly long period of time is what we can consider. So that is how it is going to look like.

Analyst sought clarity on whether the current 4% volume-value gap would persist, and management provided a long-term expectation of a 2-3% gap, indicating it's a structural aspect of their strategy.

Asked by Amit Purohit

Quick Commerce Channel Strategy Direct
Yes, yes, we are there. We are there... No, no, no. So we are present across. And for us that channel also has been growing.

Analyst inquired about the company's presence and challenges in quick commerce platforms, especially as a challenger brand, and management confirmed broad presence and growth in this channel.

Asked by Vishal Gutka

Q4 FY25 Outlook for Volume Growth Direct
No, it looks challenging. The initial signs in quarter 4 are not very encouraging. So I don't think quarter 4 is going to be meaningfully different or superior. So it's going to be tough.

Analyst asked for a near-term volume outlook, and management provided a cautious and negative assessment for Q4 FY25, indicating continued demand challenges.

Asked by Vishal Punmiya

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

Jyothy Labs reported consolidated revenues of INR704 crores for Q3 FY25, reflecting a 4% year-on-year value growth and a robust 8% volume growth. Despite this, the gross margin was maintained at 49.8% year-on-year. However, the operating EBITDA margin saw a decline of 110 bps, settling at 16.4% compared to 17.5% in the previous year, primarily due to higher operating expenses growing 7-8% and the disparity between value and volume growth.

9-Month Financial Performance and Profitability

For the nine months ended December 31, 2024, the company achieved a 4% value growth and 7.2% volume growth. Gross margin improved by 150 bps to 50.4% from 48.9% last year. Absolute EBITDA increased to INR387.7 crores from INR371.4 crores, with the EBITDA margin slightly improving by 10 bps to 17.8%. Notably, Profit After Tax for this period significantly rose to INR941.1 crores from INR291.2 crores in the prior year.

Segmental Performance and Strategic Shifts

The Ex-HI segment demonstrated strong performance with 6.1% year-on-year value growth and 10.3% volume growth in Q3. Fabric Care achieved nearly double-digit growth, and the Dishwash segment grew by 3.6%. However, the Personal Care segment declined by 3.7%, and the Home Insecticide (HI) segment experienced a 7.3% degrowth for the 9-month period. The company is actively reducing its dependence on the HI segment, which now contributes 4-5% of revenue, down from 15% historically, focusing on growing other categories.

Demand Environment and Consumer Behavior

The demand environment remains subdued, characterized by inflationary pressures and muted growth in urban India, although rural demand saw a decent recovery due to good monsoon and growing wages. Management noted a trend of consumer down-trading and an increase in unplanned, low-to-moderate order value purchases, influenced by the rapid rise of quick commerce platforms promising 10-30 minute deliveries in urban markets.

New Product Launches and Innovation Pipeline

Jyothy Labs launched several new products, including Jovia beauty soap in the mass segment, Mr. White Liquid Detergent in strategic markets, and the Maxo anti-mosquito racket. These launches are part of a broader strategy to explore new segments, enhance the product portfolio, and drive future growth, with a focus on innovation and leveraging digital platforms for targeted consumer engagement.

Q4 FY25 Outlook and Margin Management

Management expressed a challenging outlook for Q4 FY25, with initial signs not being very encouraging for volume growth, suggesting the quarter may not be meaningfully different or superior. While the company aims to maintain an EBITDA margin of 16-17% for the next financial year, they acknowledged the highly volatile input prices and competitive market scenario, emphasizing efforts to protect Q4 margins. Price increases in the body soap category in Q3 are expected to be visible in Q4.

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