Motilal Oswal is bullish on Castrol India has recommended buy rating on the stock with a target price of Rs 242 in its research report dated 7 February 2018.
Motilal Oswal's research report on Castrol India
CSTRL’s 4QCY17 revenue grew 25% YoY (and 13% QoQ) to INR9.7b, ahead of our estimate of INR8.8b, led by (a) higher volumes at 54.4m liters (+16% YoY, +11% QoQ; our estimate was 50.3m liters), and (b) better realizations at INR178.4/liter (+8% YoY, +2% QoQ; our estimate was INR175.5/liter). For CY17, revenue grew 6.7% to INR35.8b, led by volumes of 205m liters (+2.6%) and realizations of INR175/liter (+4%).
OutlookCSTRL’s >80% payout policy, RoE/RoCE of ~70% and FCF to PAT conversion at >80% reflect its superior balance sheet and high-quality cash flows, which warrant higher valuation multiples, in our view.The stock is trading at 27.2x CY19E EPS of INR6.9. Our fair value stands at INR242 (35x CY19E EPS), implying 29% upside. Maintain Buy.
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