Castrol India Ltd - ACCUMULATE - TP Rs.437 - Result Update - Kotak

Castrol India Ltd - ACCUMULATE - TP Rs.437 - Result Update - Kotak- Castrol's performance is better than our expectation. The company has reported a PAT growth of 29% qoq and 28% yoy basis to Rs.1.78 bn mainly on account of better realization, marginally higher volumes (despite GST impact) and higher other income. Overall revenue has increased by 13% yoy to Rs. 8.6 bn. Operating margin improved impressively by 150 bps to 29% in Q3CY17. The Company has also declared a bonus in 1:1 ratio with expected date of allotment 6th Jan'18.

- The Company has a strong trust on personal mobility. In Q3CY17, Castrol reported double digit volume growth (yoy) in personal mobility segment and power brands. The industrial segment also achieved a strong win for its metal working fluids with TaeguYec India (Carbide cutting tolls).

- Castrol will continue to make strong progress on its strategic priorities, focusing on new customer acquisition, distribution expansion and improving customer satisfaction. It has also entered into a new exclusive supply partnership with Piaggioand and extended its existing OEM partnerships with the VW group (Skoda, Audi and VW) and Volvo cars.

- With improved industrial activity the lubricant demand is expected to improve going forward, we opine. Additionally, new product launches with further boost lubricant sales. The company is focusing on new customer acquisition, distribution expansion and delivering premium customer experience which is expected to boost Castrol's volume growth.

- We expect the company to report an EPS of Rs.14.1 for CY2017 and Cash EPS of Rs.15.2 and an EPS of Rs.15.1 for CY2018 and Cash EPS of Rs.16.2. On the basis of our estimates, the stock at current market price is valued at 16.7x EV/EBIDTA, 26.1x P/E and 27.7x P/BV on the basis of CY18E earnings. Based on our valuation multiples model, the target price of Castrol is Rs. 437/share (unchanged) and we maintain Accumulate rating on the stock. We value the stock at 29x CY18E EPS.

Shares of CASTROL INDIA LTD. was last trading in BSE at Rs.389.65 as compared to the previous close of Rs. 397.3. The total number of shares traded during the day was 125839 in over 2080 trades.

The stock hit an intraday high of Rs. 399.4 and intraday low of 386.5. The net turnover during the day was Rs. 49370894.

Source : Equity Bulls

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