Axis Direct's research report on Gulf Oil Lubricants
Gulf Oil’s core volumes grew 7% YoY in Q1FY18 (vs. 10% normal growth) even as GST-led destocking led to 10-15% volume degrowth for peer lubricant players. Volumes are likely to pick up from Aug ’17, which will further help Gulf’s volume growth and margin (operating leverage). EBITDA margin rose to Rs 23.7/ltr in Q1FY18 (FY17: Rs 21.2/ltr) partly benefitted by price hike taken in May ‘17. Balance sheet remains strong with net cash at Rs 1.4 bn (RoCE adj. for cash at ~85% vs. unadjusted RoCE at 42%).
Best-placed lubricant player: Gulf has progressed from a B2B player to a premium lubes company over past 7-8 years. Balanced approach to B2B and B2C segments has led to strong volume growth at firm margin. Product portfolio covers entire gamut of auto lubes, with no product gaps. We expect Gulf to gain market share on new product launches (in two-wheelers/cars), OEM tie-ups and brand building. BUY.
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