Accumulate Castrol India; target of Rs 437: Kotak Securities
Kotak Securities’ research report on Castrol India
Castrol’s performance is better than our expectation. The company has reported a PAT growth of 29% qoq and 28% yoy basis to Rs.1.78 bn mainly on account of better realization, marginally higher volumes (despite GST impact) and higher other income. Overall revenue has increased by 13% yoy to Rs. 8.6 bn. Operating margin improved impressively by 150 bps to 29% in Q3CY17. The Company has also declared a bonus in 1:1 ratio with expected date of allotment 6th Jan’18.
We expect the company to report an EPS of Rs.14.1 for CY2017 and Cash EPS of Rs.15.2 and an EPS of Rs.15.1 for CY2018 and Cash EPS of Rs.16.2. On the basis of our estimates, the stock at current market price is valued at 16.7x EV/EBIDTA, 26.1x P/E and 27.7x P/BV on the basis of CY18E earnings. Based on our valuation multiples model, the target price of Castrol is Rs. 437/share (unchanged) and we maintain Accumulate rating on the stock. We value the stock at 29x CY18E EPS.
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