Lubricant stocks like Gulf Oil and Castrol India have plunged to 52-week lows, as investors have been churning money into banking, real estate and IT Stocks. However, some of these stocks do offer value and can be bought at the current levels.
Castrol India: Near 52-week low share price
Castrol India is a part of Castrol UK, and is a top player in the industrial and automotive lubricants sector in India. The stock of Castrol is trading at Rs 124, which is very close to its 52-week low of Rs 119. In fact, over the last few months, the shares have moved in a very narrow range. The shares are also trading below the 200 day moving averages. The one thing is that the shares move in a very tight band.
Dividend yield of 4.4% from Castrol India
For the last two calendar years the company has been declaring dividends of 110% or Rs 5.5 per share. This translates into a dividend yield of around 4.43%, based on the current market price of Rs 124.
It's also important to remember that the dividends have come in covid induced years, where there was even a nation wide lockdown. So, when things are much better we can expect better financial performance as well as better rate of dividends.
Why to buy the stock of Castrol India?
For the half year ending June 30, 2021, the company reported net profits of Rs 383 crores, taking the EPS to Rs 3.88. We know that the first half could also have seen an impact on Covid related restrictions. In a normal period the company is capable of putting in a much better show.
We expect the company to report an EPS of Rs 10 for FY 2022-23. This means the stock is valued at only 12 times, one year forward earnings which is attractive.
The company has almost negligible debt on its books and good free cash flow. We believe that the stock of Castrol India deserves a better discounting and it is not very lofty to aim for a price target of Rs 200 from the current levels.
The stock of Castrol India was last trading at Rs 124 on the NSE.
Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. Investing in equities is risky. The author and his family do not own any shares mentioned above.