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IDBI Capital Report
While Castrol India Ltd.'s Q2 CY23 sales were in line with our forecast, its margins were below our expectations. Castrol's top-line increased 7.4% YoY and 3.1% QoQ to Rs 13,338 million.
Volumes increased 4% YoY and 5% QoQ to 58 million litres (in line with our estimate).
Ebitda increased by 8.3% YoY to Rs 3.1 billion due to rise in sales. However, Ebitda margin expanded by only 18 basis points YoY and 42 bps QoQ to 23.2% as rising costs of key inputs muted its margin expansion
Nevertheless, Castrol India expects Ebitda margin to remain in the range of 23-26%. We maintain our CY23-24 forecasts and continue to value the stock at a price-to-earning ratio of 16 times CY24 EPS to derive a target price of Rs 159 (unchanged).
Given the recent increase in stock price, we downgrade the stock's rating to a 'Hold'.
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