MOSL: CASTROL INDIA (Buy)-EBITDA beat led by higher volumes and realizations

Castrol India: EBITDA beat led by higher volumes and realizations

(CSTRL IN, Mkt Cap USD2.9b, CMP INR188, TP INR242, 29% Upside, Buy)

• CSTRL’s 4QCY17 revenue grew 25% YoY (and 13% QoQ) to INR9.7b, ahead of our estimate of INR8.8b, led by (a) higher volumes at 54.4m liters (+16% YoY, +11% QoQ; our estimate was 50.3m liters), and (b) better realizations at INR178.4/liter (+8% YoY, +2% QoQ; our estimate was INR175.5/liter). For CY17, revenue grew 6.7% to INR35.8b, led by volumes of 205m liters (+2.6%) and realizations of INR175/liter (+4%).
• Reported EBITDA of INR3.1b (+42% YoY, +21% QoQ) was significantly above our estimate of INR2.4b, aided by lower than expected raw material cost of INR80.7/liter (+4% YoY, +1% QoQ; our estimate was INR84.4/liter). EBITDA margin expanded to 31.6% in 4QCY17 (29.4% in 3QCY17; 27.8% in 4QCY16). For CY17, EBITDA was INR10.3b (+4%), with margin at 28.8% (v/s 29.6% in CY16).
• PAT grew 26% YoY and 10% QoQ to INR1.96b against our estimate of INR1.5b. For CY17, PAT grew 2.9% to INR6.9b, with margin at 19.3% (v/s 20% in CY16).
• Volumes up 16% YoY: CSTRL’s total volumes grew 16% YoY, led by double-digit volume growth in the PCMO segment (~45% volume share) and CVO segment (~40% volume share).