Buy Gulf Oil Lubricants India; target of Rs 1000: Emkay Global Financial

Emkay Global Financial is bullish on Gulf Oil Lubricants India has recommended buy rating on the stock with a target price of Rs 1000 in its research report dated May 31, 2021.

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Emkay Global Financial’s report on Gulf Oil Lubricants India

GOLI’s revenue/EBITDA/PAT rose 44%/41%/66% yoy and up 7%/down 6%/down 7% qoq to Rs5.17bn/781mn/598mn in Q4FY21 – 4% above/in line/1% below our estimates. Volume beat of 7% was offset by equivalent miss in EBITDA/ltr as gross margin weakened. Lube sales volume rose 39% yoy/6% qoq to 35.0mn ltr, driven by improved demand across segments due to better economic-industrial activity. B2B, OEM and industrial saw record sales in Q4, but although personal mobility improved it was below pre-Covid levels. Net realization increased 1% qoq to Rs147.8/ltr but was a 3% miss, while unit COGS rose 11%. Gross margin fell 9% qoq to Rs63.6/ltr (7% miss). Unit opex fell 16% yoy/8% qoq to Rs41.3/ltr (7% below est.). EBITDA/ltr came in at Rs22.3, down 12% qoq/up 1% yoy.

Outlook

We cut FY22/23E EPS by 3%/2%, building in 6%/8% lower EBITDA/ltr, partly offset by hike in volumes by 1%/4%. We retain 20x target multiple (Mar’23E EPS) due to conservative margin estimates. We lower TP by 2% to Rs1,000 and reiterate Buy.

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