Castrol India Q3 Results Review - Confident On Growth Ahead, Despite Seasonal Hit On Volumes: Motilal Oswal

Motilal Oswal Report

Castrol India Ltd.'s revenue grew 6% YoY to Rs 11.8 billion, driven by 9% YoY growth in volumes, although realisation declined 3% YoY. Volatility in crude oil, inflationary pressures, and global uncertainties still exist.

Ebitdam declined 20 basis points YoY to 22.7%, led by additive prices being 15-20% higher than in Q3 CY22. Base oil prices are expected to rise in the next three to six months.

Volume stood at 51 million, down sequentially due to seasonality, with the decline attributed to the weakened demand in agriculture during the monsoon season. Management highlighted that volumes from the passenger vehicle segment stood at 40%, commercial vehicle at 35%, and industrial volumes at 15%. The management remains optimistic about sustaining growth in Q4 CY23.

Castrol India is actively working toward thermal solutions for electric vehicle batteries, with existing fluids designed for EVs already in its portfolio.

Last year, BP (parent of Castrol) announced a global investment of €50 million in thermal management of batteries, underscoring the company’s keen interest in this field.

Further, management pointed out that there is low penetration of cars in India because of which lubricant demand would stay robust till late 2030s and early 2040s. The threat from EVs is real, but the penetration of the same would happen gradually over a period of time.

Castrol India has always enjoyed its brand legacy, and we believe it will be able to secure its profitability with a better product mix, cost control, and the launch of advanced products with better realisation.

We reiterate our 'Buy' rating on the stock with a target price of Rs 160.

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