Target ₹730

CMP: ₹523.80

We visited Gulf Oil India Ltd’s Chennai facility, which can handle 50/18mn-ltr p.a. of core lubricant/AdBlue volumes (about 35 per cent of GOLI’s core lubes installed capacity), assuming double shifts. GOLI has deployed automatic batch blending technology from ABB, France to optimise lead time in operations. Notably, GOLI is capable of operating the Chennai facility at >100 per cent utilisation levels (three shifts), besides potentially doubling capacity within its existing land parcel.

The Chennai facility houses an R&D centre, focused on developing new blends, alternate formulations, etc. GOLI has also successfully undergone stringent audits from US- & EU-based OEMs. Mgmt. reiterated volume-growth guidance of 7-8/15-20 per cent for core/AdBlue in FY24, with target EBITDA margin of 12-14 per cent, supported by focus on long drain products, strategic pricing decisions, branding, etc.

We value GOLI using the DCF analysis. Our TP implies 11.3x Mar-25E target P/E. GOLI’s earnings outlook remains steady on strong volume CAGR, scale-up of AdBlue and gradual easing of input cost pressures. We take a constructive long-term view on the sector (refer to ‘Outlook for Indian lubricants steady’). The stock trades at an attractive valuation of about 8x FY25E earnings, combined with a healthy about 6 per cent dividend yield.

Key risks: Adverse base-oil prices/currency fluctuation; competition; technology-based change

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