Buy Gulf Oil Lubricants; target of Rs 625: Emkay Global Financial

Emkay Global Financial's research report on Gulf Oil Lubricants

GOLI reported Q3FY23 EBITDA/PAT of Rs900mn/627mn, up 17%/7% YoY and 12%/20% QoQ. EBITDA saw a marginal 1% beat due to 3% gross profit beat, led by volumes and partly offset by higher opex. PAT was 3% above our estimates, on higher other income. Sales volumes rose 53% YoY/18% QoQ to 55mn-ltr, with core lubes up 10% YoY/6% QoQ (2% core beat). AdBlue jumped by +4x/45%, leading to 8% QoQ drop each in net realization/unit COGS to Rs142/89.7 per ltr, with gross margin down 8% to Rs52.3/ltr. Opex was 4% above our estimate; but unit opex was down 9% QoQ/20% YoY at Rs36/ltr. EBITDA/ltr was also down, by 5% QoQ/23% YoY to Rs16.4, at 11% below our estimate. Other income was up 30% YoY, partly offset by higher finance cost on MTM forex losses.

Outlook

We raise FY23-25E EPS by 3-7%, to reflect lower overhead costs. We roll over to Mar25E with revised DCF-based TP of Rs625, by slightly lowering our long-term margin profile, on rising AdBlue share in the volume mix; maintain BUY.

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