Castrol India Q4 Profit Soars, Stock Upgraded to Buy

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.

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