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C
CASTROLIND
101234567893012345678980123456789.5012345678950123456789
+1.95 (+1.43%)
NSE Volume
7.5L+
Broker Reports
BUY
HOLD
BUY
BUY
Over the last decade, the lubricants industry has witnessed a huge transition from volume-to-value, yet, the Indian lubricants industry still remains one of the fastest growing amongst the world. The leadership position of Castrol India, robust back-up by the parent, strong fundamentals and consistent technological advancements keeps the company best placed to benefit from the opportunity in growth in Personal Mobility, Commercial Vehicles and Industrials segments. The company is expanding capacities and the Management is confident of stable and steady growth over the next few years. However, the unprecedented event of Covid-19 has brought the world to standstill and accordingly, we expect volumes to witness steep fall during the current year only to register a good bounce back in the next year. We had recently initiated coverage on Castrol India Ltd and would wait for some more visibility to revisit our estimates. For now, we are keeping our estimates unchanged. We expect company to deliver an EPS of Rs.9.1 in CY2022; assigning a target multiple of 17x, which is below its median P/E of last 1 year, 3 Years and 5 Years, we arrive at a target price of Rs.155 with an investment horizon of 18-24 months
BUY
The lubricants industry has witnessed a huge transition from volume-to-value, yet, the Indian lubricants industry still remains one of the fastest growing amongst the world. The leadership position of Castrol India, back-up by the robust international parent, strong fundamentals and consistent technological advancements keeps the company best placed to benefit from the opportunity in Personal Mobility, Commercial Vehicles and Industrials segments. The company is expanding capacities and the Management is confident of stable and steady growth over the next few years. However, the unprecedented event of Covid-19 has brought the world to standstill and accordingly, we expect volumes to witness steep fall during the current year only to register a good bounce back in the next year. Going forward, we expect company to deliver an EPS of Rs.9.1 in CY 2022; assigning a target multiple of 17x, which is below its median P/E of last 1, 3 and 5 Years; we arrive at a target price of Rs.155 showcasing an upside potential of 24% from current levels with an investment horizon of 18-24 months.
REDUCE
Although Castrol was successful in signing strategic alliance with 3M for auto care products, its strategy to defend potential disruptions like higher drain interval, electric cars will be the key decider, going ahead. The focus on maintaining balance between margins & volumes along with growth in the personal mobility segment will be a key factor directing the company ahead. However, due to lower auto sales, structural low volume growth in industry volumes would continue to remain a challenge for Castrol, going ahead. Hence, we value Castrol India at 17x CY20E EPS of | 7.1 to arrive at a target price of Rs 120 with a REDUCE rating.
ACCUMULATE
Volumes are expected to improve post H1CY19, driven by personal mobility. CSTRL will be able to maintain its market share, and we expect this to be driven by expanding distribution reach and an increase in product offerings. At CMP, CIL trades at 17.1x CY19E and 16x CY20E earnings. With the continued fading of valuations across the markets, we have lowered our earnings multiple to factor in the overall risk. At CMP, CSTRL is factoring most of the negatives. We maintain an Accumulate rating, with TP of 143, valuing at 18x CY20 earnings.
REDUCE
Increasing demand in metribuzin along with key products like pendimethalin and acephate are likely to drive international market growth. Further, capital investment in backward integration for some of the active pharma ingredient (API) is expected to improve the operational performance in the medium to long run. We lowered our P/E multiple to 15x on FY21E (implied EV/EBITDA of ~8.5x) due to inventory built up in the system and poor sales outlook from domestic market. We arrived a target price of Rs 155 and assigned HOLD rating on the stock.
BUY
The stock trades at 21x CY20E EPS of INR7.2. CSTRL’s >80% payout policy, RoE/RoCE of ~60% and FCF to PAT conversion at ~75% reflect its superior balance sheet and high-quality cash flows, which warrant higher valuation multiples, in our view. To factor in intensifying competition and the threat to long-term growth/margins, we revise our CY20 P/E multiple to 30x EPS of 7.2 (applying ~50% premium v/s global peers). We arrive at a fair value of INR215, implying 39% upside. Maintain Buy.
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