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Motilal Oswal
Castrol (Neutral)
CMP: ₹464.10
Target: ₹499
Castrol India’s 4QCY14 sales and Ebitda (seasonally strong quarter) were largely in-line. Net sales stood at ₹860 crore (est. ₹880 crore; +6 per cent y-o-y, +7 per cent q-o-q) and Ebitda at ₹200 crore (in-line; +20 per cent y-o-y, +17 per cent q-o-q). Marginally lower volumes (48.2m litres; +1 per cent y-o-y, +6 per cent q-o-q) compensated by higher realisation at ₹178/litre (est. ₹175/litre; +5 per cent y-o-y, +1 per cent q-o-q). Reported PAT was below estimate at ₹130 crore (est. ₹150 crore; +5 per cent y-o-y, +13 per cent q-o-q) led by (a) higher depreciation at ₹10.9 crore (est ₹8.6 crore; +33 per cent y-o-y, +30 per cent q-o-q) led by capex at Patalganga plant; and b) lower other income at ₹14.2 crore (est ₹25.6 crore; -53 per cent y-o-y, -1 per cent q-o-q) on account of lower cash balances. We expect the economic revival will lead to better volume growth in personal mobility as well as CV and industrial volumes. Outlook: Expect demand to pick up in 2HCY15 if the general economic environment improves. Sharp drop in crude prices will lower base oil prices in the near-term, however, expect volatility ₹/dollar and crude prices to continue. Given Castrol’s rich valuations maintain Neutral.
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