Castrol India - Geared For Growth - Nirmal Bang

Castrol India has so far ably defended its market share in the lube oil industry despite its premium product offerings by leveraging on its strong brand. We view the street's concerns over continued pressure on volume/market share as overdone as we expect: (1) Stagnancy in the industrial segment to be offset by robust retail demand, thus keeping overall volume stable, and (2) Pressure on margins in the coming quarters to ease with a judicious product mix.

We expect volume CAGR at 1.9% over CY11-CY14E driven by retail/workshop channel, while adjustment in product pricing and launch of low-premium products are likely to help it recapture market share.

We have assigned a Buy rating to Castrol India with a target price of Rs349 using weighted average methodology.

Source : Equity Bulls

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