Dolat Capital recommended accumulat rating on Castrol (India) with a target price of Rs 130 in its research report dated July 29, 2020.
Dolat Capital's research report on Castrol (India)
Results were in line with our estimates on revenue front and below estimates on profitability front. CSTRL’s Q2CY20 volumes were in line with our estimates at 29 TKL. Realization was at Rs 169.2/L. Revenue decreased 52.8% YoY and 28.7% sequentially due to lockdown. However, there was slow demand pick up from May and momentum was stable from June. Gross spreads decreased by 16.9% on a sequential basis. We expect spreads to expand going forward, as CIL will keep taking pricing actions as and when required and will take necessary steps to keep cost in control. Cost per litre improved 4.8% on a sequential basis and declined by 4.8% YoY due to strategic sourcing of raw material. CIL has been continuously working on protecting margins with sustainable growth.
Outlook
Given the under performance of the stock price for a prolonged period, CSTRL business performance in the next couple of quarters will be crucial for the long term stock outlook. Recommend Accumulate, with a target price of Rs 130, to trade at 16x CY21 EPS.
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