Castrol India Ltd. share price target

Castrol India (CSTRL)'s CY20 performance remained largely unhindered by declining IIP levels and muted customer off-take, with the company delivering a resilient performance for the year. Here are the key insights from CSTRL's CY20 Annual Report: CSTRL's gross profit declined 19% in CY20 (v/s CY19) due to lower volumes, weighed by disruptions caused by the pandemic and economic slowdown. Operating and other expenses fell by INR600m in CY20, driven by the company's...

Castrol reported better than expected Q1CY21 results as sales/EBITDA were 15%/8% above our forecasts led by stronger than expected volumes and realization. Net sales increased by 65% YoY to Rs11,380 mn mainly led by strong in volumes (+58% YoY to 60 mn ltrs) and higher realization (+6% YoY to Rs190/ltr). EBIDTA jumped 97% YoY to...

Castrol India's operating revenue for Q4CY20 declined 7.6% YoY to | 935.2 crore. Volumes were at 52 million litre, down ~4% YoY. Gross margins dipped 1.2% YoY to | 106.8/litre due to lower realisation. Subsequently, EBITDA/ litre was at | 49.5/litre, down 21.6% YoY. EBITDA came in at | 257.6 crore, down 24.5% YoY. PAT was at | 187.7 crore, down 30.8% YoY. Lower realisation affect margins Volume to improve, albeit on lower base Castrol volumes in Q4CY20 dipped ~4% YoY to 52 million litre. On QoQ...

Castrol reported weaker than expected results for Q4CY20 as sales/EBITDA were 13%/29% below our forecasts. Net sales decreased by 7.6% YoY to Rs9,352 mn mainly led by lower volumes (-3.7% YoY) and lower realization at Rs180/ltr (-4.0% YoY). EBIDTA fell 24.5% YoY to Rs2,576 mn; EBIDTA margin fell by 618bps YoY to 27.5% as Castrol's promotional expenses jumped nearly 6x YoY to Rs650 mn. Its net profit fell 30.8% YoY to Rs1,877 mn as depreciation increased 21.9% YoY to Rs223 mn. Despite net profit falling by 30% to Rs5.8 bn in CY20, the company maintained dividend...

Castrol India reported a healthy set of Q3CY20 numbers. Operating revenue for Q3CY20 increased 4% YoY to | 883.1 crore. Volumes were at 47 million litre, up 6.3% YoY. Castrol witnessed an increase of 7.4% YoY in gross margins at | 113/litre due to lower base oil prices. Subsequently, EBITDA/litre was at | 61.3/litre, up 10.9% YoY. EBITDA came in at | 288.2...

Castrol reported better than expected EBITDA margin for Q3CY20. The EBIDTA and PAT were 12%/9% above our estimates. Net Sales increased by 4.0% YoY to Rs8,831 mn mainly led by higher volumes (+9.3% YoY) although realization was weak at Rs188/ltr (-4.9% YoY). EBIDTA increased 17.9% YoY to Rs2,882 mn as EBIDTA margin improved 384bps YoY to 32.6%. Castrol's operating cash during 9MCY20 stood at Rs6,240 mn (150% of 9MCY20 PAT) mainly due to robust working capital management. We introduce CY22 estimates in this report. We raise our CY20 EBITDA/PAT estimates by 8%/10% to account for better than expected Q3CY20 margin. We make minor...

Realization was at Rs 187.9/L. Revenue increased by 4% YoY and 80% QoQ owing to agri demand and partial revival of pent up demand. However, there was slow demand pick up in the industrial segment and volume recovery was mainly seen from CV and 2W space. Gross spreads improved by 7.2% on a YoY basis and by 30.2% on a sequential basis. CIL is taking pricing actions as and when required and will take necessary steps to keep cost in control. Cost per litre declined by 13.7% on a sequential basis and by 9.1% YoY. Gross margins...

Further, better product mix has aided the company in avoiding a steep decline in its gross margin/liter, which stood at INR86.8/liter (-14% YoY). Owing to the lower tax rate of 26.1% (v/s 35.6% in 1HCY19), PAT stood at INR1.9b (-48% YoY). Factoring in the same along with further imposition of the extended lockdowns in various states, we have revised down our volume estimate for CY20/CY21 to 143m/186m liter (from 153m/191m liter), resulting in EPS CSTRL has entered into a strategic alliance with Jio-BP fuel retail JV to exclusively sell its products at its 1,400 outlets (which should expand to 5,500 outlets over the next five years). However, 2W segment accounts for 30% of CSTRL total volumes, which may be hugely impacted by EVs. We expect high dividend payouts to continue. Oil drain intervals are expected to rise in the commercial segment for BSVI engines.

CSTRL has clocked growth in gross profits due to benefit from lower taxation, volumes de-growth of 4.5% was witnessed due to economic slowdown and flattish revenues were clocked in. Operating profit decline was marginal despite severe raw material headwinds due to unfavourable crude and forex trends. Favourable product-mix changes as well as appropriate pricing interventions have helped buoy the revenues. New product launches, moving into adjacencies and OEM tie up will further help in volume growth. CSTRL is ready with a range of BSVI products to cater to...

We lower our CY20 volume forecast due to likely weak volumes during Q2CY20 on the back of extended lockdown. Our CY20 sales/EBITDA/EPS estimates are lowered by 6.1%/7.9%/8.2%. We make minor changes to our CY21 forecasts. We value the stock at a PER of 18x CY21E EPS (earlier Rs17x) and derive a target price of Rs138 (previous Rs139). We maintain our BUY rating on the stock. Key Highlights and Investment Rationale Volumes fall sharply: Castrol's sales volumes fell 24.6% YoY to 38 mn ltrs due to weak demand from auto as well as due to lockdown in late March. Even realization at...