Domestic brokerage firm Motilal Oswal Securities Ltd (MOSL) has recommended a ‘Buy’ rating on Castrol India shares as the company is actively pursuing growth opportunities through diversification and digital initiatives.
At the same, the
company's management has acknowledged challenges such as the impact of electric vehicles (EVs) on its core lubricants business and taking steps in the direction, the brokerage observed.
The brokerage has set a target price (TP) of ₹230 per share, implying potential upside of nearly 16% from the Monday's closing levels.
After the positive outlook by the brokerage firm, shares of Castrol India gained as much as 4.91% to hit a high of ₹208.2 apiece on BSE in morning trade.
In its report, Motilal Oswal mentioned that Castrol is looking to diversify its business beyond lubricants, which could help in achieving its growth targets.
Further, the company is placing emphasis on digital initiatives in order to adapt to changing consumer behaviours and technological advancements. These initiatives could be in terms of marketing, distribution, or operational efficiency.
However, the company's management is aware of the threat posed by EVs to traditional lubricants demand and is implementing strategies to address this challenge, possibly by developing products tailored for EVs or expanding into adjacent markets, the brokerage observed.
The stock is trading at 21.7 times the estimated earnings per share (EPS) and 14.9 times the estimated EV/EBITDA. These are valuation metrics indicating the price investors are willing to pay for Castrol's expected earnings and earnings before interest, taxes, depreciation, and amortization (EBITDA) in calendar year 2024.
Castrol India Ltd specialises in producing and promoting a wide range of lubricants and associated solutions for automobiles, motorcycles, commercial vehicles, industrial machinery, and the energy sector. It offers diverse oil lubricants and fluids tailored for various applications in these sectors.
Shares of Castrol India were trading 4.13% higher at ₹206.65 apiece on BSE at 10:16 AM.
