CSTRL’s Q1CY19 volumes were marginally below our estimates at 50.4 TKL. Revenue increased 5% YoY and decreased by 5.5% QoQ, due to growth in the personal mobility segment, focus on channels, and new premium products. Gross spreads rose by 2% on a sequential basis. We expect spreads to remain stable/expand going forward, as CIL has already hiked prices in Q1CY19. CSTRL’s management is pessimistic about its performance in H1CY19, due to the slowdown in economic activities. However, it is confident of outperforming the industry growth rate of 3% - 4% on a full year basis. Volume growth with spreads performance will be the key monitorable.
OutlookGiven significant under performance of the stock price for a prolonged period, CSTRL business performance in the next two quarters will be crucial for the long term stock outlook. We maintain Accumulate, with a target price of ` 174, to trade at 20x CY20 EPS.
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