Buy Gulf Oil Lubricants India; target of Rs 1640: ICICI Securities

ICICI Securities's research report on Gulf Oil Lubricants India

Gulf Oil (GOLI) delivered 10.6%/3.2% YoY growth in EBITDA/PAT to INR 1.19bn/INR 0.87bn (I-Sec: EBITDA/PAT INR 1.29bn/INR 0.99bn). Despite better product/segment mix and continued premiumisation, sharp INR/USD depreciation drove a decline in EBITDA margin to 12.4% (higher input cost not passed on), down 20bps YoY and below I-Sec’s estimate of 12.9%. Double-digit growth in mobility and B2B segments, with stronger AdBlue volume reflected in core lubricant/AdBlue volumes of 40.5mn/36mn litres (+9.5/+24.1% YoY). We cut earnings by 4.1/2.1/2.2% to factor in a weaker INR and slightly higher AdBlue mix vs. core lubricants (impacting margins). However, we remain positive on GOLI’s prospects over the next 2–3 years given steady volume growth, stronger margins and limited threat from EVs, at least, for the next 3–5 years.

Outlook

Valuation of 12.2x FY28E PER/8x EV/EBITDA remains quite attractive. Maintain BUY with a TP of INR 1,640 (earlier INR 1,715).