ICICI Direct recommended hold rating on Castrol India with a target price of Rs 165 in its research report dated May 07, 2018.
ICICI Direct's research report on Castrol India
Castrol India reported its Q1CY18 numbers, which were largely in line with our estimates on the profitability front mainly on account of strong EBITDA margins. The revenues increased 5.2% YoY to Rs 927.1 crore and came below our estimates of Rs 958 crore. The miss on the revenue front was mainly on account of lower than expected volumes of 51.5 million litres (our estimates: 52 million litres) and lower net realisations at Rs 180 per litre (our estimates: Rs 184.4 per litre). However, EBITDA per litre came in at Rs 53.3/litre above our estimates of Rs 52.9/litre on account of lower employee costs Subsequently, PAT which increased 1.6% YoY to Rs 181.8 crore came largely in line with our estimates.
Although, Castrol was successful in signing OEM contract and strategic alliances with automotive giants like Ford, Piaggio, VW, Volvo, Renault and Nissan, its strategy to defend the potential disruptions like electric cars will be the key decider going ahead. Recovery in industrial and commercial vehicle segment volumes and focus on increasing the personal mobility segment in its portfolio will be key factors for directing company’s growth ahead. We value Castrol India at 21x CY19E EPS of Rs 7.8 to arrive at a target price of Rs 165 with a HOLD rating.
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