Buy Castrol India; target of Rs 172: Sharekhan

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26 Aug, 2025 12:21

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Q4CY21 adjusted PAT of Rs. 189 crore, down 5.9% q-o-q missed our estimates by 9% on lower-than-expected volume/ margins and a slightly higher tax rate. Volumes stayed muted, falling 1% y-o-y to 51.5 million litres, while OPM was at flat q-o-q at as price hikes were offset by a rise in base oil prices. Castrol gained a 100 bps market share in the Bazaar segment. Ramp-up of Castrol Express Oil Change outlet at Jio-BP retail networks would aid market share gains and volume growth. Focus on allied services such as vehicle servicing and collaboration with 3M for co-branded vehicle care products would diversify the revenue pie. Calibrated price hikes (amid RM cost inflation) would shield margins.

Valuation of 13x its CY22E EPS is attractive (48% discount to historical level) despite expectation of strong earnings recovery, FCF/dividend yield of 9%/4.5%, and RoE of ~54%. We thus retain a Buy on Castrol with an unchanged PT of Rs. 172.

At 17:30 Castrol India was quoting at Rs 116.55, down Rs 0.85, or 0.72 percent.

It has touched an intraday high of Rs 117.75 and an intraday low of Rs 116.10.

It was trading with volumes of 71,652 shares, compared to its thirty day average of shares, a decrease of percent.

In the previous trading session, the share closed down 0.13 percent or Rs 0.15 at Rs 117.40.

The share touched its 52-week high Rs 154.90 and 52-week low Rs 112.95 on 07 June, 2021 and 25 January, 2022, respectively.

Currently, it is trading 24.76 percent below its 52-week high and 3.19 percent above its 52-week low.

Market capitalisation stands at Rs 11,528.22 crore.

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