MOSL CASTROL INDIA (Buy)-EBITDA above estimate-volumes flat YoY, up 7% QoQ
​Castrol India: EBITDA above estimate; volumes flat YoY, up 7% QoQ
(CSTRL IN, Mkt Cap USD3.2b, CMP INR424, TP INR531, 25% Upside, Buy)
- CSTRL's 1QCY17 revenue grew 4% YoY and 13% QoQ to INR8.8b, marginally beating our estimate of INR8.5b, led by (a) YoY flat volumes, and (b) higher realizations on account of price hikes. Volumes were flat YoY but grew 7% QoQ to 50.2m liters. Implied realizations were higher at INR176/liter (+4% YoY, +6% QoQ) due to price hikes taken in December 2016.
- EBITDA of INR2.6b (+5% YoY, +22% QoQ) was above our estimate of INR2.3b due to higher realizations. EBITDA margin expanded to 29.8% in 1QCY17 v/s 27.8% in 4QCY16 and 29.5% in 1QCY16.
- PAT of INR1.8b (+4% YoY, +15% QoQ) beat our estimate of INR1.6b, despite lower other income at INR185m (-17% YoY, -52% QoQ; our estimate was INR250m). Effective tax rate was 33.5% (v/s 36.2% in 4QCY16 and 34.9% in 1QCY16; our estimate was 35%).
- Volumes flat YoY/up 7% QoQ: CSTRL's volumes were flat YoY due to (a) 5% YoY volume growth in PCMO category (~40% volume share), (b) decline in volume growth for CVO category (~44% volume share) - demonetization impact, and (c) double-digit volume growth in industrial segment (~16% volume share).
Castrol India is a manufacturer, distributor and marketer of lubricating oils, greases and related services to automotive, industrial, marine, aviation, oil exploration and production customers across the world. For automotive lubrication (including motorcycles 2-stroke and 4-stroke engines, car petrol and diesel engines), Co.'s products include a range of manual and automatic transmission fluids, chain lubricants and waxes, coolants, suspension fluids, brake fluids, greases, cleaners and maintenance products. Co. also produces products for agricultural machinery, plant, general industry and marine engineering uses.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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