Buy Castrol India; target of Rs 550: Firstcall Research

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Buy Castrol India; target of Rs 550: Firstcall Research

Firstcall Research is bullish on Castrol India and has recommended buy rating on the stock with a target of Rs 550 in its December 16, 2010 research report.

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Firstcall Research is bullish on Castrol India and has recommended buy rating on the stock with a target of Rs 550 in its December 16, 2010 research report.

"Castrol India is the second largest player in the Indian lubricant industry and is the market leader in the retail automotive lubricant segment. It manufactures and markets a range of automotive and industrial lubricants. The company offers passenger car engine oils, premium 2-stroke and 4-stroke oils, and multi grade diesel engine oils under the Castrol and BP brand names. The Company sells its products through distributors to retail outlets. The board of directors of the company has decided to pay an interim dividend of Rs. 7 per equity share on 247280596 equity shares of Rs 10 for the year ending December 31, 2010."

"For the third quarter, the top line of the company increased 13%YoY and stood at Rs 6430 million against Rs 5667 million of the same period of the last year. The bottom line of the company for the quarter stood at Rs 1169 million from Rs 956 million of the corresponding period of the previous year i.e. a decrease of 22%YoY."

"At the market price of Rs 466.10, the stock is trading at 22.91 x and 20.53 x for CY10E and CY11E respectively. On the basis of EV/EBDITA, the stock trades at 16.89 x for CY10E and 17.10 x for CY11E. Price to book value of the company is expected to be at 10.28 x for CY10E and 6.85 x for CY11E respectively. EPS of the company is expected to be at Rs 20.34 and Rs 22.70 for the earnings of CY10E and CY11E respectively. The company's net sales and net profit are expected to grow at a CAGR of 11% and 29% over CY08 to CY11E. We recommend 'BUY' in this particular scrip with a target price of Rs 550 for Medium to Long term investment," says Firstcall Research Report.

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To read the full report click on the attachment