Checkout Budget Highlights 2023Emkay Global Financial's research report on Gulf Oil Lubricants India
Gulf Oil Lube’s (GOLI’s) Management reiterated that the Indian lube industry would maintain growth till the middle of next decade. Despite rising EV penetration, a large portion of new-vehicle sales would continue to be ICEs, leading to expansion of the lube universe; the lube market should clock 3-4% CAGR in the foreseeable future, with GOLI’s own target maintained at 2-3x of the industry (i.e. >10%). The post-Covid cost pressures that have gripped the industry (first base oil and now having affected additives too) should subside going ahead, with oil stabilizing and the supply scenario easing. GOLI took responsive retail price-hikes to maintain unit margins, though percentage margins seem optically lower. AdBlue’s annual market size is 500million-litres currently and is expected to see 3x growth in 5 years, entailing strong volumes for GOLI, which is a premium player with 15% market share. Company is also gradually increasing its EV footprint via investments and products. GOLI’s OCF would be deployed in core capex, EV foray and payout to shareholders (40% dividend payout, buyback, etc).
Outlook
We concur with Company outlook and reiterate BUY, with TP of Rs625.
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