Castrol India Sees Strong Q4 CY24 Results, Stock Upgraded to Buy
Castrol India reported strong Q4 CY24 results, beating market expectations. The company's top-line grew by 7% year-on-year and 5% quarter-on-quarter, reaching Rs 13.5 billion. This growth was fueled by new product launches and increased market presence.
Volume Growth and Segment Performance:
Sales volume saw a significant jump, increasing by 7.3% YoY and 7.1% QoQ. The Personal Mobility segment, contributing 40-45% of revenue, and the commercial vehicles segment, contributing 40%, showed strong performance, with the latter experiencing double-digit growth in Q4 CY24.
Profitability and Margins:
Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 14% YoY to Rs 3.8 billion. The EBITDA margin also expanded significantly, increasing by 173 basis points YoY to 27.8% and a notable 555 basis points QoQ. This improvement was largely due to higher gross margins resulting from lower oil prices.
Future Outlook and Valuation:
Management has projected a margin guidance of 22-25% and aims to surpass the industry volume growth of 3-4%. Analysts maintain their CY25 earnings per share (EPS) estimates and have rolled over to CY26E EPS estimates. Based on a price-to-earnings ratio of 20 times CY26E EPS, the target price for the stock is Rs 219. The rating for the stock has been upgraded from Hold to Buy.
Investment Highlights:
The recent correction in Castrol's stock price is seen as a buying opportunity. The company's strong free cash flow generation, low capital requirements, high return on equity (ROEs), and robust payouts make it an attractive investment.
Market Analysis and Updates:
This positive news for Castrol India comes amid a dynamic market environment. Investors are closely watching companies with strong fundamentals and growth potential. Castrol's performance in Q4 CY24 positions it well for future growth in the Indian market.
Disclaimer:
This analysis is based on publicly available information and research reports. Investment decisions should be made after careful consideration and consultation with a financial advisor.