Gulf Oil Lubricants Poised For 42% Upside As ICICI Securities Maintains 'Buy' — Check Revised Target Price

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ICICI Securities Report

ICICI Securities maintains 'Buy' rating on Gulf Oil Lubricants Ltd. with a target price of Rs 1,610, implying an upside of 42% from the current market price of Rs 1,136.

Gulf Oil Lubricants has seen its stock price correct ~8% over the last six months. The company’s above-industry volume growth, superior margin profile and sticky brand loyalty, demonstrated by customers towards its brands, are the key long-term triggers.

Valuations of just 11.2x FY28E PER, 7.2x EV/Ebitda and 2.8x FY28E price/book value are rather attractive vs peers (Castrol).

Gulf Oil has made material progress in growing its brand presence as well as OEM relationships over the past several years, ensuring both B2B and B2C portions of its lubricants business continue to grow steadily over the next decade.

Additionally, acquisitions made in EV charging/EV software solutions and initiatives in battery swapping and EV fluids should add to revenue over longer term.

The brokerage's valuation, averaging two-year forward PER, EV/Ebitda and target PEG multiples, implies a revised target price (based off FY28E multiples) of Rs 1,610 (earlier Rs 1,640), implying 42% upside from current market price.

The stock still trades at a discount to global players and Indian consumer companies. Even brokerage's target multiples are at a steep discount to Castrol, its nearest comparable peer.

Key upside risks

• Sharper-than-anticipated overall industry growth; and Gulf Oil Lubricants grabbing higher market share.

• Margin expansion ahead of our estimates.

• More aggressive rollout of EV charging and battery business.

Key downside risks

• Sharp downtick in traditional lubricant demand due to higher EV transition.

• Execution delays in an attempt to expand distribution presence/product range.

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