MOSL: CASTROL INDIA (Buy)-Gross margins expand on declining oil prices, higher realizations
Castrol India: Gross margins expand on declining oil prices, higher realizations
(CSTRL IN, Mkt Cap USD2.2b, CMP INR159, TP INR253, 59% Upside, Buy)
- Castrol India reported a 1% decline in its sales volume for 4QCY18 due to the base effect (volume growth of 15.8% in 4QCY17). However, decline in oil prices resulted in gross margin and EBITDA expanding. EBITDA stood at INR3.2b (our estimate INR2.5b, +4% YoY, +26% QoQ). PAT stood at INR2.1b (our estimate INR1.8b, +8% YoY, +21% QoQ).
- Realization up 3% YoY and 2% QoQ: Realization for 4QCY18 stood at INR191.4/lit v/s INR181.2/lit in 3QCY18 and INR178.4/lit in 4QCY17. Higher realization combined with decline in base oil costs resulted in gross margin increasing from INR88.7/lit in 3QCY17 to INR101.2/lit in 4QCY18.
- CY18 ends at +4% volume growth: CSTRL's total volume stood at 54m liters, (-1% YoY and +6% QoQ. Personal mobility was a key driver, while commercial vehicle segment also showed improvement. Volume growth for CY18 stood at 4%, higher than the industry growth.
- On expansion mode: CSTRL aims to invest INR1.4b in ramping up its capacity from 100m liters to 140m liters, current capacity utilization being at 75%.
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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