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Last Updated : Nov 13, 2015 12:35 PM IST | Source: Moneycontrol.com

Buy Castrol India; target of Rs 505: Firstcall Research

Firstcall Research is bullish on Castrol India and has recommended buy rating on the stock with a target of Rs 505 in its November 09, 2015 research report.

 
 
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Firstcall Research report on Castrol India

Castrol is one of the world’s leading manufacturers and marketers of premium lubricating oils, greases, metal working fluids, control fluids and related services to automotive, manufacturing, mining, marine etc., across the world.
The company’s Net profit rose by 21.46% y-o-y in Q3 CY15 and stood at Rs. 1432.00 million against Rs. 1179.00 million in the corresponding quarter of the previous year.
In Q3 CY15, Net Sales stood at Rs. 7843.00 million as compared to Rs. 8023.00 million in Q3 CY14. EBITDA or Operating profit was at Rs.2308.00 million, an increase of 23.03% y-o-y in Q3 CY15 as against Rs.1876.00 million in Q3 CY14.

Outlook and Valuation

At the current market price of Rs.440.20, the stock P/E ratio is at 34.64 x CY15E and 31.32 CY16E respectively. Earning per share (EPS) of the company for the earnings for CY15E and CY16E is seen at Rs. 12.71 and Rs.14.05 respectively.
Operating profit and PAT of the company are expected to grow at a CAGR of 13% and 12% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 6.07 x for CY15E and 5.65 x for CY16E. Price to Book Value of the stock is expected to be at 36.19 x and 32.90 x respectively for CY15E and CY16E.

The strong result during the first nine months of the year have been achieved in an environment which continues to be challenging for Commercial Vehicle Oils and Industrial lubricant oils. Looking ahead, although the drop in crude oil price has translated into lower base oil cost, the company is likely to experience volatility in the cost of goods due to volatile Rupee exchange rate. In the longer run, the company continues to remain optimistic about the Indian lubricant market and its business growth. The company is in a strong position to benefit from growth prospects on account of its strong brand. Hence, we recommend ‘BUY’ in this particular scrip with a target price of Rs. 505.00 for Medium to Long term investment.

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First Published on Nov 13, 2015 12:35 pm
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