Buy Castrol India; target of Rs 140: Sharekhan

Sharekhan's research report on Castrol India

Q3CY22 PAT of Rs. 187 crore (down 9% q-o-q) missed estimates primarily due to lower than-expected volumes while per unit margin met expectations led by price hikes. Volume performance was weak with 6%/16% y-o-y/q-o-q decline to 47 million litres due to inflationary environment while price hike helped blended realization increase of 11%/7.6% y-o-y/q-o-q to Rs. 239/litre. Thus, per unit EBITDA margin of Rs. 54.7/litre (up 4%/7% y-o-y/q-o-q) was in-line with estimate of Rs. 54.8/litre. The company took three price hikes in CY22 to mitigate higher base oil price and strike balance between volume/margin. Management expects inflationary environment and FX pressure to continue in Q4CY22. Castrol has also amended its AOA/MOA so as to focus on future opportunities in auto value chain.

Outlook

We maintain Buy on Castrol India with a revised PT of Rs. 140 given inexpensive valuation of 12.6x CY23E EPS, healthy dividend yield of ~5% and strong cash position.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Castrol India - 02-11-2022 - khan