Buy Castrol (India); target of Rs 230: Motilal Oswal

Motilal Oswal's research report on Castrol (India)

Castrol India (CSTRL), a subsidiary of Castrol Ltd. UK (part of BP Group), is the 2nd largest manufacturer of automotive and industrial lubricants in India. It has a strong distribution network of over 105,000 retail outlets serviced through 420 distributors across India. CSTRL has taken various digital initiatives, such as CSTRL Smart, CSTRL Fastscan and CSTRL Fastlane. CSTRL Smart is designed for all sales representatives operating in the field. It provides insights into who is selling what and which SKUs are involved. It encompasses over 300 distributors, serves 22-30k dealers, and extends its reach to more than 50k workshops. The primary objective of this initiative is to establish seamless connectivity among all stakeholders in the sales network. CSTRL Fastscan streamlines the process of disbursing incentive schemes by directly linking them to the bank accounts of mechanics. CSTRL Fastlane, on the other hand, serves as a platform for indirect customers to conveniently place orders.

Outlook

CSTRL maintained robust return ratios above 40% in CY23 and a dividend payout of ~86% (~3.8% dividend yield). The stock trades at 21.7x CY24E EPS of INR9.2 and 14.9x CY24E EV/EBITDA. We value the stock at 22x CY25E EPS to arrive at our TP of INR230. We reiterate our BUY rating on the stock.

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Castrol (India) - 2722024 - moti