Gulf Oil Lubricants India Ltd. – Powering a Bright Future
Gulf Oil Lubricants India Ltd. (GOLIL), a part of Hinduja Group, is a leading player in India’s lubricants industry, offering automotive and industrial lubricants. Established in 2008, headquartered in Mumbai, the company operates in automotive, industrial, and export sectors. It boasts a robust distributor network of over 80,000 touch points, servicing 40+ OEMs and 500+ B2B clients.
Product Portfolio
- Automotive lubricants
- Industrial lubricants and specialty oils
- EV fluids
- Marine Lubricants
- AdBlue
- 2-Wheeler VRLA Battery
Subsidiaries: As of FY23, GOLIL does not have any subsidiaries, but it has one holding and one associate company.
Growth Strategies
- Strategic expansions into the EV infrastructure market.
- Leading in AdBlue provision.
- Diversification into related sectors like battery technology and charging infrastructure.
- Collaboration with key players in the automotive and EV industry for research and development.
- Focus on innovation and product development to meet evolving market demands.
- Strengthening distribution channels to reach untapped markets and increase market penetration.
Financial Highlights
- Q3FY24 Performance:
- Achieved highest ever quarterly revenue: Rs.817 crore.
- Operating profit increased by 23% YoY to Rs.111 crore.
- Net profit surged to Rs.81 crore, marking a 29% increase compared to Q3FY23.
- Core lubricants business grew by 5.8% YoY during the quarter.
- Operating margin: 14%.
2.Financial Performance:
- Revenue and PAT CAGR (FY18-23): 22% and 5%.
- Average ROE (Return on Equity) for FY18-23: 25%.
- Average ROCE (Return on Capital Employed) for FY18-23: 28%.
- Debt-to-equity ratio: 0.34.
Industry Outlook
- Market Size: India ranks as the world’s third-largest lubricant market, poised for continued growth.
- Technological Advancements: Advancements in lubricant technology drive product innovation, meeting diverse industry needs.
- Environmental Regulations: Stringent environmental regulations propel demand for eco-friendly lubricants, influencing market dynamics.
- International Trade: India’s lubricant market actively engages in international trade, facilitating global partnerships and market expansion.
- Consumer Awareness: Increasing consumer awareness regarding the benefits of quality lubricants fuels demand, shaping market trends.
Growth Drivers
- Growing GDP and domestic consumption.
- Infrastructure investments.
- Government initiatives like Atmanirbhar Bharat and Automotive Mission Plan 2016-26.
- Transition towards electric vehicles, with the Indian government aiming for 30% of new vehicle sales to be electric by 2030.
- Increasing awareness and adoption of environmentally friendly solutions like AdBlue.
Competitive Advantage
- Gulf Oil is undervalued compared to competitors like Castrol India Ltd.
Outlook
- Gulf Oil aims to surpass market growth rates.
- Strong position in AdBlue market.
- Investments in EV business anticipated to yield returns.
- Sales distribution indicating potential pricing power.
- Margin guidance range: 12-14%.
- B2C accounted for approximately 58% of sales, with B2B making up the remaining 42% for the quarter, compared to 56% B2C and 44% B2B in the previous quarter.
Valuation
- Recommendation: We suggest a BUY rating for Gulf Oil stock.
- Target Price: Our target price (TP) for Gulf Oil is Rs.1,126, based on a 17x FY25E EPS valuation.
Risks
- Raw Material Price Fluctuations: Base oil prices, closely tied to crude oil, can directly impact profit margins.
- Geopolitical Crises: Supply chain disruptions due to geopolitical conflicts may hinder resource availability, affecting essential raw material supplies.
Recap of our previous recommendations (As on 03 May 2024)
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