Castrol India shares zoom 18% on huge volumes, trade near record high

Castrol India stock update: In the past one year, the stock price of Castrol India has more-than-doubled, zooming 107 per cent, as compared to 23 per cent rally in the benchmark index

Shares of Castrol India moved higher by 18 per cent to Rs 252 on the BSE in Wednesday's intraday trade, hitting a multi-year high amid heavy volumes. The stock of the lubricant company inched towards its record high of Rs 272 touched on December 8, 2014.

At 02:54 PM, Castrol India was trading 15 per cent higher at Rs 245.65 as compared to 0.54 per cent rise in the BSE Sensex. As many as 103.6 million shares, representing 10.5 per cent of total equity of the company, have already changed hands on the NSE and BSE.

In the past one year, the stock price of Castrol India has more-than-doubled, zooming 107 per cent, as compared to 23 per cent rally in the benchmark index.

 

Castrol India is one of India's leading lubricant companies with brands such as Castrol CRB, Castrol GTX, Castrol Activ, Castrol POWER1, Castrol EDGE, Castrol MAGNATEC and Castrol VECTON.

The company also operates in select segments like High Performance Lubricants and Metal-Working Fluids, which are used in a wide variety of industries such as automotive manufacturing, mining, machinery, and wind energy.

In automotive lubricants, the anticipated off-take growth observed throughout 2023 is poised to sustain momentum in 2024. The company said it is committed to propelling this growth by expanding participation across diverse price segments, ensuring broader availability across geographic strata, reinforcing its workshop presence, and making substantial investments to nurture premium brands.

Castrol India, however, has reduced margin guidance from an earlier range of 23-26 per cent to 22-25 per cent, but has retained volume growth guidance of 4-5 per cent during the calendar year 2024 (CY24).

The management highlighted that it remains focused on its commitment to brand building, widening its distribution network, and launching new products, all of which, they believe, will contribute positively towards volume and market share expansion.

Further, the Castrol India management has a bullish outlook on India as a market, foreseeing robust demand for lubricants persisting until the late CY30s and early CY40s, largely attributed to the low penetration of cars in the country. While the threat from electric vehicles (EVs) is real, its adoption is expected to occur gradually.

"Castrol India has always enjoyed strong brand legacy, and we are confident in its ability to maintain profitability through an improved product mix, stringent cost-control measures, and the launch of advanced products that command better realization,” Motilal Oswal Financial Services had said in its March quarter (Q1CY24) results update. The stock, however, is trading above its target price of Rs 240 per share.

Strong free cash flow generation, minimal capital requirements, high ROEs, and strong payouts make Castrol India an attractive franchise. However, the recent rise in stock price caps the potential upside. We await a better entry point in the stock, analysts at IDBI Capital had said in their Q1CY24 result update.