Castrol's Q2CY21 results were broadly in-line with our expectations. Net sales increased by 81% YoY to Rs 8,896 million mainly led by strong in volumes (+55% YoY to 45 mn ltrs) and higher realization (+12% YoY to Rs190/ltr). Interestingly, the company gained market share during the quarter and its gross profit/ltr witnessed only modest decline on a QoQ basis despite higher raw material prices which was commendable in our view. Overall, EBIDTA jumped 107% YoY to Rs 1,975 million as EBIDTA margin increased 278bps YoY to 22.2%.

IDBI Capital has upgraded Castrol India to 'Buy' from 'Accumulate' rating earlier.

Commenting on the result review, the broking firm said, "We broadly maintain our CY21/CY22. We expect sales/EBTIDA/PAT to increase at a CAGR of 9%/24%/26%, respectively over CY20-22E.  We now value the stock at a PER of 20x CY22E EPS (earlier 17x) to derive a target price of Rs177 (earlier Rs146). We upgrade the stock to a Buy from an Accumulate rating earlier."

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