Castrol reported weaker than expected results for Q4CY20 as sales/EBITDA were 13%/29% below our forecasts. Net sales decreased by 7.6% YoY to Rs 9,352 million mainly led by lower volumes (-3.7% YoY) and lower realization at Rs 180/ltr (-4.0% YoY). EBIDTA fell 24.5% YoY to Rs 2,576 million; EBIDTA margin fell by 618bps YoY to 27.5% as Castrol’s promotional expenses jumped nearly 6x YoY to Rs 650 million. Its net profit fell 30.8% YoY to Rs 1,877 million as depreciation increased 21.9% YoY to Rs 223 million.

Despite net profit falling by 30% to Rs 5.8 billion in CY20, the company maintained dividend at Rs 5.5/sh in CY20 (same as CY19) on working capital release.

Commenting on the results, IDBI Capital Markets & Securities said, "We broadly maintain our CY21/CY22 estimates. We continue to value the stock at a PER of 17x CY22E EPS and derive a target price of Rs 143 (earlier Rs 141). Given the recent increase in stock price, we downgrade the stock to an Accumulate from a Buy earlier."

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.