Buy Gulf Oil Lubricants India; target of Rs 910: Emkay Global Financial

Emkay Global Financial's report on Gulf Oil Lubricants India

Gulf Oil Lubricants India (GOLI) posted revenue/EBITDA/PAT of Rs4.12bn/783mn/591mn in Q2FY21, down 2%/up 3%/down 5% yoy (up 71%/208%/244% qoq), beating estimates by 7%/10%/11% on the back of a 9% volume beat and higher Other Income. Total reported lube sales volume rose 7% yoy/69% qoq to 29.5mn ltr, with growth across segments driven by industry recovery, pent-up demand and GOLI’s targeted initiatives. EBITDA/ltr came in at Rs26.5, up 83% qoq/down 4% yoy (in line with estimates). Net realization rose 1% qoq to Rs139.6/ltr (2% miss), while unit COGS fell 3%. Gross margin was up 7% qoq at Rs67.4/ltr. Unit opex fell 15/16% yoy/qoq to Rs40.9/ltr. EBITDA/ltr was Rs26.5, up 83% qoq/down 4% yoy (in line). EBITDA margin recovered to 19% high.

Outlook

We raise FY21E volumes by 7-8% and EBITDA/ltr by 7%, but cut FY22/23E unit margin by 7/8% due to base oil tightness. We raise FY21E EPS by 17% but cut FY22/23E by 2%/5%, building in high depreciation. We roll over to Sep’22E with a TP of Rs910. Retain Buy.

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