Midcap Lubricants Stock Showing Upside Potential, Buy For Upto 25% Gains, Says Sharekhan

Sharekhan has a "Buy" on Castrol India Ltd., a midcap Petr sector stock. It has estimated a target price of Rs 140/share for the stock and sees a potential upside of up to 25% from its current level. According to the brokerage, Q4CY2022 PAT of Rs. 193 crore (up 2.6% y-o-y) was largely in-line as beat in per litre margin, higher other income, and lower tax rate gets offset by subdued lubricant sales volume.

Castrol India Share Price, Returns, 52 Week Low/High, & Market Cap

The stock of Castrol India is currently trading at Rs 112.40 apiece on NSE, down 1.40% from the previous close of Rs 114 apiece.

Its 52 week low is Rs 99.05 apiece and 52 week high is Rs 136.80 apiece, respectively. It has a market capitalisation is Rs 11,097.95 crore.

The stock has fallen 3.32% in 1 week. Whereas in 1 month it declined 6.46% and in 3 months it declined 16.29%, respectively.

The stock gained 2.93% in 1 year. However, it declined 9.18% in 3 years and 45.44% in 5 years, respectively.

Sharekhan Maintain Buy on Castrol with an unchanged PT of Rs. 140/share

According to Sharekhan, Castrol's alliance with the Jio-BP retail network provides long-term volume growth opportunity and scope for market share gain, while the company's focus to diversify revenue stream (auto services) is also a step in the right direction. Moreover, parent BP's focus on EV batteries could provide Castrol India edge (in supply of EV fluids) in India's transition towards EVs. "Valuation of 12.8x/11.5x its CY2023E/CY2024E EPS is attractive and is at a significant discount to its historical average one-year forward P/E multiple of 25x. the stock offers decent dividend yield of ~5% and the balance sheet is robust with a cash position of Rs. 1,218 crore (11% of current market capitalisation) as on December 31, 2022. Hence, we maintain our Buy rating on Castrol with an unchanged price target (PT) of Rs. 140," the brokerage has said.

Key Risks

According to Sharekhan, the Key Risks to "Buy" call would be, "An economic slowdown could lead to lower-than-expected lubricant volumes, whereas a sharp rise in base oil prices could impact margins."

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.