Hold Gulf Oil Lubricants; target of Rs 900: ICICI Direct

ICICI Direct's research report on Gulf Oil Lubricants

Gulf Oil Lubricant’s Q4FY19 numbers were below our estimates on account of a slowdown in volume growth due to weak auto sales numbers. Volume growth in Q4FY19 was at 10% YoY, below our estimate of 14% YoY. Hence, revenue growth was below our estimate of Rs 448.2 crore and grew 16.8% YoY to Rs 436.2 crore. EBITDA per litre was at Rs 24.9 per litre (Q3FY19: Rs 24 per litre) below our estimate of Rs 27.5 per litre on account of higher-than-expected operational expenses and negative operating leverage. Subsequently, EBITDA during the quarter increased 18% YoY to Rs 74.2 crore, below our estimate of Rs 85.1 crore. PAT increased 15% YoY at Rs 47.6 crore (our estimate: Rs 53.7 crore).

Outlook

GOL’s focus on personal mobility, OEMs and improvements in product mix will remain its key driver as it commands a lower market share (>7%) giving ample headroom to cover. New OEM tie-ups through aggressive marketing are also expected to help GOL gain market share. However, upcoming disruptions like those of electric vehicles and the company’s strategy to defend the same will be the key decider, going ahead. We value the company at 20x FY21E EPS of Rs 45.1 to arrive at a target price of Rs 900.