Castrol India Ltd. share price target

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...

Castrol India's operating revenue for Q4CY19 declined 2.1% YoY to | 1011.8 crore. Volumes at 54 million litre remained flat YoY. The company witnessed an increase of 7.5% YoY in gross margins at | 108.1/litre due to a better product mix. Subsequently, EBITDA/litre was at | 63.2/litre, up 7.5% YoY. EBITDA came in at | 341.2 crore, up 7.5% YoY. The company shifted to a...

3 February 2020 Total volumes for CY19 were 4% lower YoY to 204m liters, while realization was 4% higher YoY to INR190/liter (highest ever). Gross margin was 11% higher YoY to 104.4/liter, led by reported record-high gross margins of INR108/liter (+7% YoY) in 4QCY19. The improvement in realization and gross margin for full-year CY19 was aided by improved product mix and robust cost control, led by process efficiencies and debottlenecking in 3QCY19. CSTRL has been increasing its dividend since the last three years and has recommended total dividend of INR5.5/share for CY19. At current levels, dividend yield remains attractive at ~3.7%, maintain 4QCY19 reported net sales were ~5% below estimate at INR10.1b (-2% YoY), owing to lower realization at INR187/liter (-3% est. -2% YoY). Sales volume came in line at 54m (flat YoY). However, EBITDA was 10% above est.

We cut our volumes/realization estimates for CY19/CY20 given weak demand from auto OEMs. Overall our net sales/EBTIDA stand lowered by 7%/12% for CY19 and 5%/8% for CY20, respectively. We cut our target multiple from 24x to 20x as we now expect EPS to grow at a CAGR of only 6% over CY18-20E. Nevertheless, Castrol is currently trading at an attractive valuation (PE of 15.6x CY20E). Our revised target price...

Volumes suffer; preparing for the uncertain times ahead Net sales increased 2% YoY to INR10.4b (~7% miss) in 2QCY19. EBITDA was up 13% YoY at INR2.8b, while PAT grew 11% YoY (-1% QoQ) to INR1.8b (12% miss). Total expenditure of INR7.5b was flat YoY but increased 9% QoQ due to spending...

Castrol India reported its Q2CY19 numbers, which were below our estimates mainly on account of lower-than-expected volumes, which fell 2.8% YoY to 55.4 million litre, below our estimate of 56.6 million litre. Revenues increased 2.2% YoY to | 1039.4 crore, below our estimate of | 1104 crore due to lowerthan-expected realisations. Castrol witnessed increase of 15% YoY in gross margins at | 101.1/litre (our estimate - | 100/litre) due to better product mix. On account of higher other expenses, EBITDA/litre came in at | 51.3/litre (up 16.2% YoY), below our estimate of | 55.4/litre. Hence, PAT was at | 182.7...

CSTRL's Q2CY19 volumes were in line with our estimates at 55.4 TKL. Revenue increased 2.2% YoY and by 6.5% QoQ, due to growth in the personal mobility segment, focus on channels, and new premium products. Gross spreads declined by 2% on a sequential basis. We expect spreads to remain stable/expand going forward, as CIL has already hiked prices in Q1CY19. CIL has been continuously working on protecting margins with sustainable growth. Management expects H2CY19 to boost volumes and they maintain they guidance between 2%-4%. Volume growth with spreads...

Castrol India limited is one of the leading automotive and industrial lubricant manufacturing and marketing companies in India. The company has a proud heritage of innovation and success since over 100 years in the country. Castrol India is a public limited company with 51% share held by BP through its wholly subsidiary,...

Margins remain healthy on account of better product mix Castrol's raw material cost (base oil) are dependent on the movement of crude oil prices and rupee against US dollar. During the past few months, the company took two price hikes, which led to an increase in net realisations to | 193.7 crore vs. | 180 per litre YoY. As a result, gross margins increased and came in at | 101.5/litre. However, the recent upward trajectory in crude oil prices will escalate raw material costs. On account of the same and relatively weak product mix, we expect gross margins at | 100.6 per litre...