Buy Castrol India; target of Rs 260: Motilal Oswal

Motilal Oswal's research report on Castrol India

Castrol’s 4QCY24 EBITDA was a beat on our estimate, as the EBITDA margin came in at 27.8% (our est: 21.7%). The 4Q volumes were in line at 59m lit. Management highlighted that it remains focused on brand building, widening the distribution network, and launching new products, all of which we believe will contribute to volume growth and market share expansion. Management maintains a bullish outlook on India as a market and expects robust demand for lubricants to remain until the late CY30s and early CY40s, largely attributed to the low penetration of cars in the country. While the threat from EVs is real, EV adoption is expected to be gradual.

Outlook

We also maintain our valuation multiple of 26x (average: 22.4x and mean + 1 S.D.: 29.6x) and arrive at our TP of INR260. We reiterate our BUY rating.