Religare Institutional Research recommends 'Buy' on Gulf Oil Lubricants (GOLIL) with target price of Rs 355.

Commenting on the investment rationale, the stock broker said, "GOLIL, the erstwhile lubricant business of Gulf Oil Corp, unlocks latent value in the business after demerger, it plans decoupling from unrelated, lossmaking divisions (realty, explosives, mining), enabling a sharper focus on the domestic lubricant market (GOLIL expects to grow at 2-3x the market) and a likely re-rating of trading multiples as ROE of the lubricant business (35-45%) dwarves that of the consolidated entity (7%).

Our TP implies a P/E multiple of 18x FY17E which in our view is fair given through GOLIL’s ~50% discount to Castrol,healthy ROE of 35-45%,industry-leading growth profile, and  steady free cash flows in the range of Rs 0.5 billion-0.7 billion.We recommend Buy on GOLIL with a DCF-based TP of Rs 355."

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