Castrol India- 16% potential upside with 3 fold increase in PAT
Castrol follows a January- December financial year, making the July-September quarter, their third. Castrol India witnessed a three fold increase in PAT, standing at Rs.570 crore in Q3 CY21 from Rs.186 crore in Q3 CY20. Revenue from operations also increased from Rs.1,073 crore in Q3 CY20 to Rs.3,101 crore in Q3 CY21.
Due a sharp rise in input costs seen all over the market, the Cost of Goods Sold was a challenge that was handled very ingeniously by monitoring the price hikes very carefully along with timely increases in market and advertisement spending to increase the customer base. This in turn also helped in a 6% rise in volume growth in Q3 CY21. The EPS standing at Rs.1.88 was down by 9% YoY but up by 33% QoQ.
Castrol launched a new product for cars and commercial vehicles using the newest BS-VI technology available. Even then, there is a downside risk of low sales volumes. This is overshadowed by the potential upside of 16% due to the price hikes, along with a BUY call by analysts, with a price target of Rs.160.
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