Small-Cap Stock To Buy: Can Gain 66% In Short Term, Board Recommends Dividend Of Rs. 5/Share

Gulf Oil Lubricants India Ltd: Target Price, CMP and performance

The Current Market Price (CMP) of Gulf Oil Lubricants India Ltd. (GOLI) is Rs. 411. Emkay Global has estimated a Target Price for the stock at Rs. 685. Stock is anticipated to give a 66.60% return, in 1 year.

Gulf Oil Lubricants India Ltd. (GOLI)'s Q4FY22 revenue has gained 23% YoY and 6% QoQ to Rs. 6,389mn. On the other hand, the company's Q4FY22 EBITDA/PAT increased 14%/6% YoY and 16%/8% QoQ to Rs. 891Mn/ Rs. 634mn. EBITDA has exceeded the brokerage firm's estimate by 18% due to a 4% beat on gross profit and a 3% lower OPEX.

However, the company's unit OPEX decreased by 4% QoQ but went up 4% YoY at Rs. 43.1/ltr. EBITDA/ltr was, hence, a 17% beat at Rs. 23.8, up 11% QoQ/6% YoY.

Advantages and risks, stated by Emkay Global

The firm is expecting that its demand growth in rural is likely to pick up. Additionally, the board has recommended a final dividend of Rs. 5/share, which is lower than that of FY21 due to the buyback earlier. According to Emkay Global, "Valuations remain very attractive given a double-digit earnings CAGR."

GOLI's EBITDA margin has expanded by 100bps to 14% QoQ, with the sales mix largely stable QoQ. The battery segment recorded revenue of Rs. 180mn in Q4FY22. It faced supply-chain disturbances (FY22 revenue down 15% YoY). Mentioning the stock's advantages, the firm said, "Revenue/EBITDA/PAT for FY22 grew by 33%/8%/5% YoY to Rs. 21.9bn/Rs. 2.86bn/Rs. 2.11bn, aided by a 17% jump in volumes to 134mn ltr, offset by an 8% fall in EBITDA/ltr to Rs. 21.3 as unit COGS pressure mounted. Lube sales volume rose 7% YoY /4% QoQ to 37.5mn ltr, driven by DEO, PCMO, and industrial-infra. Capex guidance is Rs. 150-200mn annually with plant expansion on the anvil in the next 2-3yrs, along with cash preservation for new ventures."

However, GOLI's Other Expenditure increased 15% YoY/1% QoQ to Rs. 1.34bn.

About the company: Gulf Oil Lubricants India Ltd

Gulf Oil Lubricants India Ltd is a part of the Hinduja Group, and the company has increased its market share by 0.5-1% in FY22 as the industry saw a 1-2% fall. They are the fastest-growing lubricant player by consistently outperforming the industry growth rate YoY, with 11% CAGR volume growth in the last 8 years, GOLI has recorded 3x-4x times growth of the lube industry. They have a fully automated certified Blending Plant in Silvassa (Western India) with a capacity of 90000 KL and a world-class R&D centre. GOLI has a Pan India network of 320 Auto Distributors, 30 Industrial Distributors, and over 50000 Retailers, backed by the logistics support of 33 depots, 5 regional offices, and a corporate office in Mumbai.

Gulf Oil Lubricants India Ltd. took a 3-4% bazaar price hike in Apr'22. Gulf Oil sees healthy volumes with economic tailwinds/infra push and maintains its guidance of 2-3x volume growth over industry growth in the medium term. It continues to expand its footprint in the EV ecosystem and synergize its existing business.

(Also read: Stock To Buy: Anand Rathi Suggests Buying This Stock For Good Returns, Revenue Rose To Rs. 7.8bn)

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.