Share price of industrial and automotive lubricants manufacturer Castrol India jumped over 3 percent intraday on February 4 after brokerage firm Kotak Institutional Equities upgraded the stock to buy from sell and raised the target to Rs 180 from Rs 130 per share.
The research firm has raised CY20-21 EPS estimates by 10-14 percent factoring in lower base oil prices. It is of the view that valuations are inexpensive at 14x CY21e EPS and the dividend yield is attractive at 5-6 percent.
Castol India's long-term risks to volumes from the adoption of electric mobility is adequately priced in adding that its Q3 results were ahead of expectations driven by the record-high margin and steady volumes.
The company reported a 28 percent hike in profit after tax for the quarter ending December even as revenue during the quarter registered single-digit decline. It stood at Rs 271.3 crore as against Rs 211.9 crore in the year-ago period. Revenue declined by 2.9 percent to Rs 1,028 crore while EBITDA stood at Rs 354.4 crore, a year-on-year growth of 3.3 percent.
Also, the Finance Minister Nirmala Sitharaman, in her Budget speech proposed to allow a deduction for the dividend received by holding company from its subsidiary.
She said non-availability of credit of DDT to most of the foreign investors in their home country results in a reduction of the rate of return on equity capital for them.
The stock price jumped over 32 percent in the last 6 months and was quoting at Rs 151.90, up Rs 4.75, or 3.23 percent. It has touched an intraday high of Rs 152 and an intraday low of Rs 149.
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