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RETAIL RESEARCH Stock Update 21 Dec 2017 Castrol India Ltd   Industry CMP   Recommendation

RETAIL RESEARCH

Stock Update

21 Dec 2017

Castrol India Ltd

 

Industry

CMP

 

Recommendation

Add on dips to

Sequential Targets

Time Horizon

 

Lubricants

Rs. 206

Buy at CMP and add on declines

Rs. 188.50-191.50

Rs. 224.50 and 256

4-6 quarters

HDFC Scrip Code

CASINDEQNR

 

We had issued a Stock Note on Dec 14, 2017 (when its CMP was Rs.405) with a recommendation to “Buy at CMP and add on declines to price band of Rs. 377-383” for sequential targets of Rs. 449 and Rs. 512 over the next 4-6 quarters. Refer:

   

BSE Code

 

500870

 

NSE Code

CASTROLIND

 

Bloomberg

 

CSTRL IN

Corporate Action (Issue of Bonus share)

 

Company had recommended bonus shares in the ratio of 1:1 on 07th Dec 2017 on Rs. 5/- each fully paid up Equity Share. Ex- date for issuing Bonus Share (1:1) as approved by company was on 21st Dec 2017 (Record date 22nd of Dec 2017). Now, stock is trading at bonus adjusted price of Rs 206 and investors can hold for sequential targets of Rs 224.50 and Rs 256 in 4-6 quarters.

CMP Dec 21 2017

 

Rs. 206

Equity Capital (Rs crs)

 

494.6

Face Value (Rs)

 

5.0

Equity Share O/S (crs)

 

98.9

Company Description

 

Market Cap (Rs crs)

 

20377.50

Castrol India Ltd (CIL) is the second largest player in Indian lubricant industry mainly catering to the automotive and industrial segments. The company has a market share (in value terms) of 20% in the domestic lubricants market. Parent Company Castrol Ltd (a British Petroleum (BP) group company) owns 51% stake in CIL and CIL gets advantage from exclusive tie-ups with original equipment manufacturers (OEM) due to global tie-ups of automobile companies with BP. Castrol has one of the largest manufacturing and marketing networks amongst the lubricant companies in India. It has manufacturing plants located at Silvassa, Patalganga and Paharpur.

Book Value (Rs)

 

6.02

Avg. 52 Wk Volumes

 

883823

52

Week High

 

226.9

52

Week Low

 

176.6

 

View and Valuation:

 

Shareholding Pattern % (Sept 30, 17)

 

Given the rapid pace of industrialization and good growth in automobile sales, we are comfortable about the growth prospects for lubricants market and business growth of Castrol in the medium term. The company is in a strong position to benefit from growth prospects on account of its strong brands and enduring relationships with key stakeholders. CIL continues to remain optimistic about the Indian lubricant market and its business growth.

Promoters

 

51.0

Institutions

 

30.6

Non Institutions

 

18.4

After a subdued CY17, Castrol looks forward to a much better CY18. The Castrol management is confident about prospects of its business in India over the long term and has decided to continue making investments in India unabated by recent slow growth. Lower crude oil and lube oil prices augur well for the margin trajectory. We believe the stock makes for good investment over the short to medium long term. The stock deserves to get valuation of an FMCG player given the brand pull it carries especially as volume growth seems to have resumed. We feel investors could buy and add on dips to Rs. 188.50 191.50 bands (~24.5x of CY18E EPS) for sequential targets of Rs 224.50 and Rs 256 (29.0x and 33x of CY18E EPS). At the CMP of Rs 206 the stock trades at 26.6x of CY18E EPS.

Total

 

100.0

Fundamental Research Analyst Abdul Karim abdul.karim@hdfcsec.com

RETAIL RESEARCH

P a g e

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RETAIL RESEARCH Financial Summary Particulars (Rs cr) Q3CY17 Q3CY16   YoY-% Q2CY17 QoQ-% CY15

RETAIL RESEARCH

Financial Summary

Particulars (Rs cr)

Q3CY17

Q3CY16

 

YoY-%

Q2CY17

QoQ-%

CY15

CY16

CY17E

 

CY18E

Total Income from Operations

861.4

 

761.7

 

13.1%

870.4

-1.0%

3285.3

3357.9

3465.4

 

3725.3

EBITDA

253.6

 

212.9

 

19.1%

209.5

21.1%

895.8

1004.9

994.6

 

1138.1

APAT

178.2

 

139.8

 

27.5%

137.9

29.2%

616.2

674.9

673.7

 

767.2

Diluted EPS (Rs)

3.6

 

2.8

 

27.5%

 

2.8

29.2%

 

6.2

6.8

6.8

 

7.8

P/E (x)

       

33.1

30.2

30.2

 

26.6

P/BV (x)

       

35.4

34.2

30.1

 

25.8

RoE-%

       

86.7%

96.7%

88.1%

 

85.1%

Quarterly Financials

(Source: Company, HDFC sec)

Particulars (Rs cr)

 

Q3CY17

 

Q3CY16

 

YoY-%

Q2CY17

 

QoQ-%

9MCY17

 

9MCY16

 

YoY-%

Total Income from Operations

 

861.4

 

761.7

 

13.1%

 

870.4

 

-1.0%

 

2614.0

 

2588.2

 

1.0%

Changes in inventories

 

10.7

 

-2.2

 

-586.4%

 

-11.2

-195.5%

 

-27.7

 

-15.8

 

75.3%

Cost of materials consumed

 

351.6

 

311.6

 

12.8%

 

388.7

 

-9.5%

 

1105.2

 

1014.6

 

8.9%

Purchase of Stock in trade

 

31.3

 

48.8

 

-35.9%

 

51.9

 

-39.7%

 

149.7

 

169.2

 

-11.5%

Employee Expenses

 

46.2

 

45.8

 

0.9%

 

48.9

 

-5.5%

 

144.9

 

132.5

 

9.4%

Other Expenses

 

168

 

144.8

 

16.0%

 

182.6

 

-8.0%

 

515.5

 

502.3

 

2.6%

Total Expenditure

 

607.8

 

548.8

 

10.8%

 

660.9

 

-8.0%

 

1887.6

 

1802.8

 

4.7%

EBITDA

 

253.6

 

212.9

 

19.1%

 

209.5

 

21.1%

 

726.4

 

785.4

 

-7.5%

Depreciation

 

11.1

 

10.7

 

3.7%

 

11.8

 

-5.9%

 

35.2

 

34.2

 

2.9%

EBIT

 

242.5

 

202.2

 

19.9%

 

197.7

 

22.7%

 

691.2

 

751.2

 

-8.0%

Other Income

 

33.3

 

15.5

 

114.8%

 

15.5

 

114.8%

 

67.3

 

51.5

 

30.7%

Interest

 

0.2

 

0.1

 

100.0%

 

0.1

 

100.0%

 

0.6

 

1.2

 

-50.0%

PBT

 

275.6

 

217.6

 

26.7%

 

213.1

 

29.3%

 

757.9

 

801.5

 

-5.4%

Tax (including DT & FBT)

 

97.4

 

77.8

 

25.2%

 

75.2

 

29.5%

 

262.8

 

282.4

 

-6.9%

Reported Profit After Tax

 

178.2

 

139.8

 

27.5%

 

137.9

 

29.2%

 

495.1

 

519.1

 

-4.6%

Adjusted PAT

 

178.2

 

139.8

 

27.5%

 

137.9

 

29.2%

 

495.1

 

519.1

 

-4.6%

EPS (Rs.)

 

3.6

 

2.8

 

27.5%

 

2.8

 

29.2%

 

10.0

 

10.5

 

-4.6%

Key drivers-Physical Metrics

(Source: Company, HDFC sec)

Particulars (Rs cr)

Q4CY15

Q1CY16

 

Q2CY16

Q3CY16

Q4CY14

Q1CY17

Q2CY17

 

Q3CY17

Volume (mn ltrs)

 

46.1

 

50.1

 

56.5

 

45.7

 

47.0

 

50.2

 

50.9

 

49.1

Volume Growth-%

 

-4%

 

9%

 

5%

 

1%

 

2%

 

0%

 

-10%

 

7%

Realization per ltr

171.0

 

169.9

 

171.3

 

166.1

 

165.8

 

175.7

 

171.0

 

175.4

Cost per ltr

 

80.8

 

78.2

 

74.0

 

78.4

 

77.4

 

80.5

 

84.4

 

80.2

Contribution

 

90.2

 

91.8

 

97.3

 

87.7

 

88.4

 

95.2

 

86.6

 

95.3

(Source: Company, HDFC sec)

18 Months daily closing Prices RETAIL RESEARCH (Source: Company, HDFC sec) RETAIL RESEARCH P a

18 Months daily closing Prices

RETAIL RESEARCH

18 Months daily closing Prices RETAIL RESEARCH (Source: Company, HDFC sec) RETAIL RESEARCH P a g

(Source: Company, HDFC sec)

RETAIL RESEARCH Fundamental Research Analyst: Abdul Karim ( abdul.karim@hdfcsec.com ) HDFC securities Limited, I Think

RETAIL RESEARCH

Fundamental Research Analyst: Abdul Karim (abdul.karim@hdfcsec.com)

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com.

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Disclosure:

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