Dolat Capital: Castrol India’s Volume De-Growth Due To Economic Slowdown And Lockdown
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Dolat Capital Report
Castrol India Ltd.’s results were in line with our estimates on revenue front and below estimates on profitability front.
Castrol’s Q2 CY20 volumes were in line with our estimates at 29 thousand kilo litre. Realization was at Rs 169.2/litre.
Revenue decreased 52.8% YoY and 28.7% sequentially due to lockdown. However, there was slow demand pick up from May and momentum was stable from June.
Gross spreads decreased by 16.9% on a sequential basis. We expect spreads to expand going forward, as Castrol India will keep taking pricing actions as and when required and will take necessary steps to keep cost in control.
Cost per litre improved 4.8% on a sequential basis and declined by 4.8% YoY due to strategic sourcing of raw material.
Castrol India has been continuously working on protecting margins with sustainable growth. Given the under performance of the stock price for a prolonged period, the company’s business performance in the next couple of quarters will be crucial for the long term stock outlook.
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