Castrol India Ltd. share price target

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...

Outlook and Valuation: Castrol has managed to recover its EBITDA margin to over 29.0% in last two quarters after falling to mid-20s during CY18 indicating its brand power. While its volume de-grew by 2.1% YoY in Q1CY19; it was better than industry performance. Castrol is currently trading at attractive valuations (PE of 17.7x CY20E). Further, dividend yield at 4.4% on our CY19E remains attractive. We continue to value Castrol at 24.0x on its CY20E EPS to derive a target price of Rs198 (previous...

We have been interacting with lubricants experts to cognize the future trends and prospects of the lubricants industry. The ride ahead for players is likely to remain tough owing to intensifying competition and the challenges in oiling the growth wheel over the longer term. We revise our CY20E P/E multiple for CSTRL from 35x to 30x, factoring in the aforementioned challenges.

Subdued Growth To Continue: Castrol reported sales volume of 54 Mn Lt during Q4CY18 led by higher demandfrom the retail segment. Total volume for the year 2018 came in at 214 Mn Lt which is higher by 4.5% YoY out of which 80% growth came from new product launches.

ICICI Securities Ltd | Retail Equity Research Castrol India reported its Q4CY18 numbers, which were above our estimates on the profit front. Revenues increased 6.5% YoY to | 1033.4 crore in line with our estimates. Volumes fell marginally by 0.7% YoY to 54 million litre below our estimates of 56.3 million litre However, the quarter witnessed an increase of 0.7% YoY in gross margins at | 98.4/litre, above our estimate of | 89.9/litre mainly due to a better product mix. Due to the same and lower other expenses,...

Castrol's Q4CY18 EBITDA margin was a big beat at 30.7% (+618bps QoQ) although volume at 54 mn ltrs was slightly below our estimate. Net sales grew 6.5% YoY Rs10,334 mn (in-line with our forecast) mainly led by higher realization (+7.3% YoY). EBITDA was ahead of our forecast and increased 3.5% YoY to Rs3,174 mn. EBITDA margin improvement was mainly led by price hike and lower base oil price. Even net...

31 January 2019 Castrol India reported a 1% decline in its sales volume for 4QCY18 due to the base effect (volume growth of 15.8% in 4QCY17). However, decline in oil prices resulted in gross margin and EBITDA expanding. EBITDA stood at INR3.2b (our estimate INR2.5b, +4% YoY, +26% QoQ). PAT stood at INR2.1b (our estimate INR1.8b, +8% YoY, +21% QoQ). Realization for 4QCY18 stood at INR191.4/lit v/s INR181.2/lit in 3QCY18 and INR178.4/lit in 4QCY17. Higher realization combined with decline in base oil costs resulted in gross margin increasing from INR88.7/lit in 3QCY17 to INR101.

Castrol India Ltd (CIL) reported in-line revenue growth of 7.6% YoY in Q3CY18, which was both volume and price led. However, the company disappointed on the profit front with 10.3% & 5.8% YoY de-growth in its EBITDA and PAT respectively. Impacted by higher input cost and INR depreciation (vs USD), the EBITDA margins contracted sharply by 491bps YoY to 24.5%.

Volume Exceeds Our Estimation: Castrol sold 51 Mn Lt of lubricant oil during Q3CY18 vs our estimation of 49 Mn Lt.This calendar year the company has exceeded its average volume run rate during all the three quarters.

Castrol's Q3CY18 results were in line with our expectations. Net sales grew by 7.6% YoY Rs9,269 mn led by volume growth across categories. Nearly 90% of the volume growth was led by new products which were launched in the past one year. Personal mobility segment continued to be the volume growth driver. However, EBITDA margins contracted 491bps YoY mainly due to rupee depreciation and higher prices of key inputs. EBITDA fell 10.3% YoY to Rs2,274 mn. Further, other income fell 44.1% YoY to...