Emkay Global Financial is bullish on Gulf Oil Lubricants India has recommended buy rating on the stock with a target price of Rs 870 in its research report dated June 18, 2020.
Emkay Global Financial's report on Gulf Oil Lubricants India
Gulf Oil Lubricants India (GOLI) posted revenue/EBITDA/PAT of Rs3.60bn/554mn/359mn in Q4FY20, down 18%/25%/24% yoy and 15%/29%/36% qoq (13%/30%/32% below our estimates), due to a significant Covid-19-led hit on volumes in the second half of March. Total reported lube sales volumes plummeted 16% yoy/11% qoq to 25mn ltr (12% miss), with core volumes down 14% yoy. Usual heavy March-end selling activities were disrupted by Covid-19. April was further weak, though volumes started recovering from May. Net realization fell 4% qoq to Rs143/ltr, while unit COGS was lower by 3%. Hence, gross margin contracted 5% qoq to Rs71/ltr (up 6% yoy). Unit opex rose 17% yoy/3% qoq to Rs49/ltr on lower volumes. EBITDA/ltr declined 11% yoy/19% qoq to Rs22, a 19% miss.
Outlook
With volume outlook fluid now, we build in a 20% fall in FY21 (vs. 7% growth earlier) but assuming FY22 volume growth at 20%. We cut FY21/22E EPS by 37%/26% and TP by 21% to Rs870. GOLI is our SMID pick and we maintain Buy on a Covid-19 recovery story.
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