Accumulate Gulf Oil Lubricants; target of Rs 757: Dolat Capital

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Dolat Capital's research report on Gulf Oil Lubricants

Gulf Oil Lubricant’s had a roller coaster FY20 on a macro level as well as company level. Ambiguity around GST, volatility in raw material price, crude oil and currency movement impacted the volume growth and profitability. GOLIL’s focus areas has been digitization, capturing greater opportunities, growing return on investments, brand building and safety and health of employees and people connected with GOLIL. Their new way forward strategy will take into account all these aspects, towards consistent value creation over the long term. This is their strong commitment to their stakeholders. The coronavirus crisis has affected demand for lubricants; however, a new normal is waiting to emerge as the situation continues to improve. GOLI expects to grow at 2-3x of the industry, however, may see some delays in FY21 volumes till the economy has not recovered fully and pent up demand coming, before recovering in FY22. The volume growth will continue to outperform the industry from FY22, where growth will come from new product launches, OEM tie ups and expansion of distribution channels.

Outlook

However, due to slowdown in auto industry and less movement of vehicles due to unprecedented crisis, we maintain Accumulate, with a TP of Rs. 757 based on 17x FY22E earnings.

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