The current financial year is not one that Castrol would like to remember. The increased volatility in crude oil prices and rupee-dollar exchange rates has adversely affected the company's performance.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
Historically, Castrol's topline has been growing by more than twice that of the industry average. However, there is now some skepticism as to whether the company can sustain such a performance. The industry as a whole grows by an unimpressive 3%-4%.
As the company is barred from marketing its products from petrol pumps, Castrol adopted a novel approach of retailing its lubes through auto part shops or the 'bazaar segment'. However, post 1996 the PSUs were permitted to enter the lucrative bazaar segment.
This resulted in the oil public sector units (PSUs) making inroads into Castrol's forte. With the winds of liberalisation intensifying the PSUs became savvier in marketing their products. Consequently, they have been able to encroach into what was once Castrol's hunting ground.
Besides competition the external environment has turned against Castrol. Crude oil prices have been surging since the beginning of FY99 to touch ten-year highs of $35/ barrel (Brent). Consequently, base oil (primary feedstock) prices have firmed up. This has increased the company's raw material.
Further, Castrol imports 94% of its base oil requirements. The total imports of the company constitute 20% of its turnover. With the rupee depreciating (8% YTD) the company's raw material procurement costs have spiraled.
The crude oil price rise and rupee depreciation have been a double whammy for Castrol. Both these factors have resulted in the company's bottomline being significantly hit. We have estimated that Castrol will report a 28% drop in post tax profits for the current fiscal FY01.
At Rs 203 the company trades on a multiple of 18.9 on the cumulative 3 quarters annualised earnings.
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.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407