Gulf Oil Lubricants India - Shifting Gears For A Frictionless Ride; Systematix Initiates Coverage With A 'Buy'

Systematix Research Report

We initiate coverage on Gulf Oil Lubricants India Ltd. with a Buy rating and a target price of Rs 1,700. The company is at a pivotal juncture in its growth journey where it can leverage its solid brand recall, innovative product portfolio and strategic diversification to drive new-age businesses for sustainable and above-industry earnings growth.

Lubricant volumes have seen a robust 8.2% compound annual growth rate over the last 10 years (FY14-FY24) versus 3.2% for the industry, recording an impressive 2.6 times industry growth. Including AdBlue volumes, Gulf Oil Lubricants saw a 33% spurt in CAGR over FY21-FY24 to 270 million litres.

The company enjoys 7%-8% and 25% market share in lubricants and AdBlue segments, respectively. We estimate Gulf Oil Lubricants’s overall volumes would continue to outpace industry CAGR by 11% over FY24-FY27E.

A series of strategic acquisitions and entry into EV charging and data center fluids space should improve Gulf Oil Lubricants’ growth avenues. We forecast healthy revenue/ Ebitda/ profit after tax CAGR of 9.7%/ 12.6%/ 14.6% during FY24-FY27E. Return n equity/return on capital employed should stay healthy at ~27%.

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