Buy Gulf Oil Lubricants Ltd For Target Rs.1,525 by Choice Institutional Equities Ltd
Margin Strength Sustained through Timely Price Increases:
GOLI's pricing power and disciplined pass-through mechanisms strengthened earnings resilience, enabling the company to preserve 12.9% EBITDA margin and protect per-litre profitability through periods of input cost inflation. Meanwhile, revenue growth was primarily driven by 17% YoY volume growth, supported by the company's proactive approach to ensuring uninterrupted demand and supply security for customers during the crisis. The company is expanding aggressively across 12 of its 15 operating segments, resulting in consistent market share gains. This is reflected in GOLI's growth of nearly 2–3x the industry's 3–4% average growth rate, indicating an increasing presence in the overall lubricants market
The investment case remains underpinned by sustained market share gains, brand-led distribution expansion and industry-leading B2C growth. Sticky retail pricing and disciplined execution is estimated to support resilient margin, enabling the company to consistently outperform the lubricants industry average over the medium term
FX volatility remains a near-term headwind; however, GOLI actively manages currency exposure through disciplined treasury practices, while a supportive pricing environment enables timely pass-throughs so as to preserve margin.
Overhang of EV penetration: GOLI has reinforced its strategic entry into the EV supply chain by increasing its stake from 51% to 65% during last fiscal year by investing INR 380 Mn. Approximately one out of three EV buses in India is operating on a Tirex fast charger. We estimate this optionality could scale up to INR 3–4 Bn revenue, adding ~10% to the topline, with an EBITDA margin of 12– 14% over the next few years.
View and Valuation: We have maintained our target price of INR 1,525 and revised our FY27 EPS estimate downwards by 2.4%. We value the company using the DCF framework and derive a TP of INR 1,525/sh, implying PE multiple of 12.6x/10.8x at FY28E /FY29E EPS. We retain our ‘BUY’ rating on the stock
Capacity Ramp-up to Support Volume Growth: GOLI aims to increase its capacity, from 140,000 to 240,000 KL, by FY27. The additional capacity in Chennai is expected to come online by Q3FY27, while Silvassa facility will ramp up by Q4FY27
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SEBI Registration no.: INZ 000160131
