Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Castrol: Raw material blues - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 29, 2003

    Castrol: Raw material blues

    Castrol India announced its second quarter results today. The company reported a 4% growth in the topline while its bottomline has taken a hit of 6%. On a half yearly basis the topline was up marginally whereas the bottomline improved by about 4%. We take a detailed look at the results.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Net sales 2,984 3,106 4.1% 5,507 5,552 0.8%
    Other Income 22 49 118.8% 65 107 64.3%
    Expenditure 2,306 2,516 9.1% 4,353 4,415 1.4%
    Operating Profit (EBDIT) 677 590 -12.9% 1,153 1,137 -1.4%
    Operating Profit Margin (%) 22.7% 19.0%   20.9% 20.5%  
    Interest 25 6 -76.1% 47 17 -64.0%
    Depreciation 33 35 7.3% 66 70 5.7%
    Profit before Tax 642 597 -6.9% 1,105 1,156 4.7%
    Extraordinary items (7) -   (7)    
    Tax 199 189 -5.2% 361 390 8.1%
    Profit after Tax/(Loss) 436 409 -6.2% 737 767 4.0%
    Net profit margin (%) 14.6% 13.2%   13.4% 13.8%  
    No. of Shares 123.6 123.6   123.6 123.6  
    Diluted Earnings per share* 14.1 13.2   11.9 12.4  
    P/E Ratio   15     16  
    * annualised            

    With the increase in industrial sales and also on account of higher sales in the automotive segment, the company saw a 4% growth in the topline. It should be noted that the company is heavily dependent on the automobile industry and any increase in volume sales in the auto sector helps the company to improve its topline. In the first quarter the company had reported a decline in topline of about 5% while it increased in the second quarter by about 4%. This seems to be due to the fact that the auto sector may have reported healthy volume growth.

    For the June quarter the company's expenses increased at a rate higher than that of the topline. Castrol imports its key raw material (base oil) on a forward contract for about 6-8 months. It should be noted that the crude oil prices were heading north during the same period. Thus this increased the expenses of the company. Raw material as a percentage of net sales increased from 49% to 54% during the June quarter. This resulted in a decline of operating profit margin by about 370 basis points.

      % of net sales  
      2QFY03 2QFY04 1HFY03 1HFY04
    Stock 0.3% 2.4% -0.5% -5.7%
    Raw material 49.3% 54.0% 51.7% 59.9%
    Staff costs 6.1% 5.8% 5.8% 6.1%
    Advertising 6.5% 4.8% 6.0% 4.2%
    CIF 3.7% 3.6% 4.1% 3.7%
    Other exp 11.4% 10.4% 11.9% 11.3%

    The company was able to reduce its interest outgo significantly and this provided some respite to the otherwise declining bottomline. However the net profit was down 6% during the June quarter.

    At Rs 201, the stock is trading at a P/E multiple of 16x its annualised 1HFY04 earnings. With the demand in both automobile and industrial segment picking up the company is likely to benefit on the sales front. However the impact of increased base oil prices will continue to impact its operating profit margins during the remaining part of the year. Also the company is facing competition from the oil PSUs that are becoming more vibrant towards this sector. In the long term, however, we expect that the company will benefit as a result of support from its parent for its raw material sourcing needs and increase in demand as a results of buoyancy in the auto sector. The appreciation of rupee is also likely to benefit the company since it imports most of its raw materials.



    Equitymaster requests your view! Post a comment on "Castrol: Raw material blues". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Castrol India: Volume Growth Continues (Quarterly Results Update - Detailed)

    Aug 2, 2016

    Castrol India Ltd has announced results for the second quarter of the current year ended December 2016. The company has reported a year on year (YoY) growth of 5.2% in the net sales while net profits for the quarter grew 12.1% YoY during the quarter.

    Castrol India: A smooth quarter (Quarterly Results Update - Detailed)

    May 10, 2016

    Castrol Ltd has reported 7.1% year on year (YoY) growth in the topline for the quarter ended March 2016 while the bottomline for the quarter grew 17.5% YoY.

    Castrol India: Lower input cost offsets volume decline (Quarterly Results Update - Detailed)

    Mar 1, 2016

    Castrol Ltd has reported 7.9% year on year (YoY) decline in the topline for the quarter ended December 2015 while the bottomline for the quarter grew 6.7% YoY

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in CASTROL INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts