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Volume Outperformance via Integrated Approach:

GOLI’s strategic alignment across operations, sales and strategy has created a competitive advantage. The firm has delivered 7–8% CAGR as compared to industry average growth rate of 3.8%. Moreover, it has the ability to anticipate demand across 15 segments, such as Passenger Cars and Industrials. Therefore, it has invested appropriately in plant’s agility to grow market share in the B2C segment, which accounts for 53% of the business. Having secured partnerships with 40+ OEMs in order to expand in the B2B market, we believe GOLI is well-positioned to increase volumes.

From Pricing Leverage to Profit Stability – GOLI’s Game Plan:

GOLI has raised its average realized price by ~21% over the past 7 years, driven by product mix, price hikes and schemes. By comparing the average realized price with Brent crude and Asian Base Oils, we conclude GOLI is now focusing on maintaining or increasing margins coupled with volume growth. As we expect Brent prices to decline over the next year, in line with US EIA and IEA; we expect GOLI’s EBITDA margin to rise by 100bps above its current guidance band of 12–14% in FY27E–FY28E.

Consistent Investment in Branding Builds Competitive Moat:

GOLI has consistently invested INR0.5-1bn p.a. over the past 10 years in order to build its brand equity. This has propelled loyalty, margin-backed volume growth, and landed GOLI a competitive advantage. The firm has further sharpened its consumer insight by appointing FMCG leaders Abhijit Kulkarni (as COO) and Aarthy Shridhar (as CMO). Additionally, GOLI’s global motorsport associations – most notably with McLaren and Williams Racing – offer a compelling, yet underutilized pathway into passenger vehicle segment where the firm holds <5% market share

Investment View: We expect GOLI’s Revenue/EBITDA/PAT CAGR of 9%/14%/18% from FY25–28E. Thus, we initiate GOLI with a ‘BUY’ recommendation and target price of INR 1,600/share with an upside of ~29%. We primarily value the company using DCF model, implying a PE multiple of 15.2x/13.6x at FY27E EPS/FY28E EPS. GOLI trades at PEG ratio of 0.9 as compared to industry leader which trades at ~3.0, implying strong upside for GOLI.

Moreover, we compare GOLI against its competition with respect to four levers of competitive advantage: (a) Pricing Leverage (b) Branding (c) Cost of suppliers and (d) Upcoming Regulations.

Downside risks: (a) Higher than expected depreciation of currency may further pressurise margins (b) Faster than anticipated adoption of Electric vehicles (c) Stricter than expected emission norms, particularly for diesel passenger cars under BSVII.

Optionality: Tirex, an EV charging manufacturing company that GOLI acquired in FY23 is targeting INR 300–400 crore in revenue p.a. over the next 3–4 years with ~12–14% of EBITDA margins. If this plays out, it positions GOLI for a meaningful upside to our current estimates.

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