This Small Cap Stock Has Hit 52-Week Low, Has Small Equity, Low P/E: Time To Buy

The stock of Gulf Oil Lubricants (a part of the Hinduja group) a major player in the lubricants market has been on a decline for the last few trading sessions. The stock has now dived to a new 52-week low of Rs 489 and was last seen trading at Rs 490. We think it is a good time to buy the stock of Gulf Oil Lubricants for the long-term.

How the moving averages in the stock of Gulf Oil Lubricants are working?

20-day moving averages	Rs 547
50-day moving averages	Rs 572
100-day moving averages	Rs 594
200-day moving averages	Rs 652

If we see the stock at the current market prices is trading at Rs 492, which is significantly below the moving averages mentioned above. Some would treat this as a bearish trend. However, at some stage the stock would start gaining and given that it has also hit a 52-week high of Rs 827, a potential for an upside remains.

Gulf Oil Lubricants: Good growth prospects ahead

The company is one of the top lubricants player in the industry. Recently, the company launched a host of e-lubes for electrical vehicles. Apart from this, Gulf Oil recently inaugurated a new Adblue section in its Chennai plant & another section for manufacturing Metal Working Fluids in Silvassa plant. Initiatives are on at the company to be ready for an exponential growth in electric vehicles.

Gulf Oil has also tie-up with the Construction and Mining business division of L&T to launch a range of genuine oils for their equipments and customers. Last year the company's two-wheeler battery business also became profitable.

For the quarter ending Sept 30, 2022, the company reported a net profit of Rs 58.90 crores, which was a jump of 93% from the previous quarter ending June 30, 2021. However, the previous quarter did see some selective lockdowns which impacted growth.

A good long-term bet

The shares of Gulf Oil Lubricants maybe a good bet for a number of other reasons. The promoter holding is very high at 71%. The company is part of the renowned Hinduja group and has a long-standing track record. A dividend yield of nearly 3.5% also makes the stock an attractive bargain at the current rates.

If we annualize the EPS of Rs 11.66 that the company has been reporting for the last two quarters, we believe that the EPS should hit Rs 50 at least in 2022-23 given the economic growth that the country is seeing. This means the price to earnings ratio is less than 10 times, which is not bad at all. Buy the stock of Gulf Oil, for the long-term.

We believe that as the economic momentum picks-up in the coming days, the stock could rally as demand for lubricants rise as travel begins. There are very few stocks at the moment that are trading close to 52-week lows, with reasonably good fundamentals.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author, are not liable for any losses caused as a result of decisions based on the article.