Target: ₹1,250
CMP:L ₹1,067.10
We initiate coverage on Gulf Oil Lubricants (GOLI) with a Buy rating and a TP of ₹1,250. GOLI is the second largest private player in petroleum lubricant space, with an estimated 7-8 per cent market share in its focus segments of automotive and industrial lubricants, as per the company. GOLI has progressively been cornering market share over the last three years, which is impressive amid the larger context of overall industry growth slowing somewhat.
Also, with aggressive branding and distribution rollout, diversification initiatives into battery and EV fluids and chargers, GOLI’s earnings momentum should remain industry leading over FY24-27E. We factor in 11.4 per cent EPS CAGR over FY24- 27 and value GOLI using an average of PER, EV/EBITDA and PEG.
We note that despite the run up in the last year, the stock still trades at a discount to global players and Indian consumer companies. Even when we compare the stock to domestic Oil & Gas companies (not a relevant comparison, in our view, given the promoter and business lines of most of Indian O&G companies), we see scope for material rerating ahead.
Key downside risks: Downtick in traditional lubricant demand, execution delays and competitive pressures.