Dolat Capital's research report on Castrol (India)
CSTRL’s Q2CY19 volumes were in line with our estimates at 55.4 TKL. Revenue increased 2.2% YoY and by 6.5% QoQ, due to growth in the personal mobility segment, focus on channels, and new premium products. Gross spreads declined by 2% on a sequential basis. We expect spreads to remain stable/expand going forward, as CIL has already hiked prices in Q1CY19. CIL has been continuously working on protecting margins with sustainable growth. Management expects H2CY19 to boost volumes and they maintain they guidance between 2%-4%. Volume growth with spreads performance will be the key monitorable.
Outlook
Given significant under performance of the stock price for a prolonged period, CSTRL business performance in the next two quarters will be crucial for the long term stock outlook. Recommend Accumulate, with a target price of ` 143, to trade at 18x CY20 EPS.
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