Gulf Oil Lubricants shares may see 25% upside, says ICICI Securities
Gulf Oil Lubricants India share price jumped over 7% on Monday after ICICI Securities initiated coverage on the stock with a ‘Buy’ rating. Gulf Oil shares spiked as much as 7.7% to ₹1,076.90 apiece on the BSE.
ICICI Securities has a target of ₹1,250 per share for Gulf Oil Lubricants India, implying an upside of 25% from Saturday’s closing price.
Gulf Oil Lubricants India is the second largest private player in the petroleum lubricant space, with an estimated 7-8% market share in its focus segments of automotive and industrial lubricants, as per the company.
While the overall Indian lubricant industry has decelerated at 0.8% over the last five years, which is FY18 to FY23, Gulf Oil recorded an impressive volume CAGR of 17.6% over the same period.
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“The company has managed to demonstrate impressive resilience and brand strength in the extremely competitive lubricants space to grow market share and improve margins as well. Additionally, with an aggressive build-out of distribution infrastructure, brand spends, new product launches and new segment entry, Gulf Oil Lubricants is emplacing the building blocks for sustained growth over the next 3–5 years,” ICICI Securities said in a report.
It sees Gulf Oil Lubricants tracking consistent positive business growth over FY24-27E and in the base case estimates, the brokerage bakes in 6.7% CAGR in volumes in the core lubricant business while the smaller AdBlue segment should show a faster 14.7% CAGR over the next three years.
“What enthrals us further is the increasing demand potential of Electric Vehicle (EV) fluids and industrial fluids, negating any potential slowing in traditional ICE vehicle lubricant demand in the longer term. Overall, the pickup in demand from the Commercial Vehicles (CV) segment, aggressive national road infra expansion coupled with rising industrial activity and gradual diversification into new areas should drive industry leading growth for Gulf Oil Lubricants over the next 3–5 years,” said the brokerage firm.
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It factors in 11.4% Earnings Per Share (EPS) CAGR estimates over FY24- 27.
Key downside risks for the company would be a downtick in traditional lubricant demand, execution delays, and competitive pressures, according to the brokerage firm.
Gulf Oil share price has jumped over 20% in one month and more than 55% in three months. The stock is up over 48% year-to-date (YTD). In the last one year, Gulf Oil Lubricants shares have rallied over 157%.
At 2:00 pm, Gulf Oil shares were trading 6.86% higher at ₹1,067.80 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 04 Mar 2024, 02:02 PM IST
