CastrolIndia NirmalBang 01012013

Initiating Coverage
Institutional Equities
Castrol India
31 December 2012
Reuters: CAST.BO; Bloomberg: CSTRL IN
Geared For Growth
BUY
Castrol India has so far ably defended its market share in the lube oil industry
despite its premium product offerings by leveraging on its strong brand. We view
the streets concerns over continued pressure on volume/market share as
overdone as we expect: (1) Stagnancy in the industrial segment to be offset by
robust retail demand, thus keeping overall volume stable, and (2) Pressure on
margins in the coming quarters to ease with a judicious product mix. We expect
volume CAGR at 1.9% over CY11-CY14E driven by retail/workshop channel, while
adjustment in product pricing and launch of low-premium products are likely to
help it recapture market share. We have assigned a Buy rating to Castrol India
with a target price of Rs349 using weighted average methodology.
Renewed focus to capture market share: Our interaction with industry
experts/dealers/mechanics/lube companies revealed that the company has regained
market share at ~22% in September 2012 after shedding almost 200bps last year as a
result of its premium product offerings (premium touched 30%-35%). The gain is on
account of: (1) Premium pricing versus rivals stabilising in the band of 20%-25%, (2)
Castrol being relatively immune to cost pressures, considering the companys positioning
as price leader, (3) Launch of low-premium products like Activ Go for bikes and RX
Super for commercial vehicles to mark its presence in the mid-size segment.
Volume growth, palpable signs of recovery visible: We expect volume to grow
2.4%/3.4% in CY13E/CY14E, respectively, after posting negative growth in
CY11/CY12E. We expect it to report volume of 208mn/213mn/220mn litres in
CY12E/CY13E/CY14E, registering volume CAGR of 1.9% over CY11-CY14E compared
to 0.5% likely over CY09-CY12E. We believe volume growth would be driven by: (1)
Rising exposure of the company towards the personal mobility segment, (2)
Retail/workshop volume growth (on YTD basis volume grew 7% though industrial volume
declined), (3) The companys renewed focus on capturing market share by offering lowpremium products, (4) Growing penetration of Hub & Spoke model in commercial
vehicles, where volume growth in light commercial vehicles (LCVs) arrests the decline in
volume from heavy commercial vehicles (HCVs), and (5) Increased focus on small towns
and rural areas, a key growth market in the personal mobility space, in conjunction with
its plan to capture the business from the tractor segment.
Assign Buy rating to the stock: We have assigned a Buy rating to the stock with a
target price of Rs349 using weighted average methodology to capture medium to longterm potential. We assign 60% weight to PE and a 20% weight each to DCF/Gordon
dividend discount methodology. We believe a PE multiple of 30xCY14E earnings (two
year average of 27x) will sustain to reflect: (1) Volume CAGR of 1.9% over CY11-CY14E
compared to 0.5% over CY09-CY11, (2) Expansion in margins of 300bps over CY12ECY14E, (3) The company regaining market share with the launch of low-premium
products and (4) MNC parentage aiding the launch of innovative products to compete
with Shell and Petronas (5) Companys price leadership position (6) Earnings growth at
13%/16% in CY13/14, which would result in RoE to improve to 72.7%/78.8% compared
to 69.5% in CY12E.
Y/E December (Rsmn)
Net sales
YoY (% )
EBITDA
EBITDA margin (%)
Net profit
EPS
RoAE (%)
RoACE (%)
P/E (x)
CY12E
CY13E
CY14E
27,348
29,818
31,968
18.0
9.0
7.2
7,251
6,584
6,013
26.5
22.1
18.8
4,903
4,811
4,359
9.9
9.7
8.8
93.5
83.1
69.5
93.8
83.3
69.7
30.1
30.6
33.8
Source: Company, Nirmal Bang Institutional Equities Research
CY10
CY11
34,439
7.7
6,742
19.6
4,920
9.9
72.7
72.9
30.0
35,721
3.7
7,793
21.8
5,701
11.5
78.8
79.0
25.9
Sector: Oil & Gas

CMP: Rs298
Target Price: Rs349
Upside: 17%
Ashutosh B
ashutosh.b@nirmalbang.com
+91 22 3926 8110
Vivek Sarin
vivek.sarin@nirmalbang.com
+91 22 3926 8176
Key Data
Current Shares O/S (mn)
494.6
Mkt Cap (Rsbn/US$bn)
146.3/2.7
52 Wk H / L (Rs)
338/194
Daily Vol. (3M NSE Avg.)
207,741
Shareholding (%) 1QCY12 2QCY12 3QCY12

Promoter
71.0
71.0
71.0
FII
7.8
7.9
8.1
DII
7.0
7.1
6.5
Corporate
1.0
0.9
1.0
13.2
13.0
13.4
General public
One Year Indexed Stock Performance

170
160
150
140
130
120
110
100
90
Dec-11
Feb-12
Apr-12
Jun-12
CASTROL INDIA
Aug-12
Oct-12
Dec-12
NSE S&P CNX NIFTY INDEX
Price Performance (%)

Castrol India
Nifty Index
Source: Bloomberg
Please refer to the disclaimer towards the end of the document.
1M
6M
1 Yr
(1.2)
15.4
47.1
2.5
14.2
23.6
Gross margin spread to rise: We expect the gross margin spread at Rs62/Rs66/Rs70 per litre in
CY12E/CY13E/CY14E, respectively, compared to Rs62/litre in CY10 and CY11. The company has
shown continuous uptrend in gross margin on per litre basis since 1996, except for one instance in CY02.
We see gross margin rising due to: (1) Change in the product mix towards synthetic/semi-synthetic
engine oils, (2) Launch of Professional range of synthetic engine oil priced 25%-30% higher than
conventional products, and (3) Most new cars/bikes/commercial vehicles are based on
synthetic/semi-synthetic technology base.
Earnings growth to turn positive: We expect earnings growth of 13%/16% in CY13E/CY14E,
respectively, after posting negative growth over the past two years and RoE to improve to 72%/78%
in CY13E/CY14E respectively compared to 69.5% in CY12E. The management has reiterated its stand
to defend margins in the range of 23%-24% in a volatile foreign exchange/crude oil situation and so
we expect EBITDA margin at 20%/22% in CY13E/CY14E, respectively. We expect margin to improve
despite venturing into low premium products on account of: (1) Increasing proportion of sales from
higher premium synthetic/semi-synthetic products and (2) Aggression in sale of low priced products
only in selected pockets which have witnessed increased competitive intensity. The consensus EPS
estimate for CY13 earnings stands at Rs10.94(Range lies between Rs9.1-11)
Exhibit 1: One-year forward P/E
Exhibit 2: Three-year moving average P/E
(x)
40
(x)
40
35
35
30
30
25
25
20
20
15
15
10
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
10
Current PE
Avg.PE
1SD
2SD
-1SD
3-yr moving avg
-2SD
3-yr avg.PE
1SD
2SD
-1SD
Source: Bloomberg, Nirmal Bang Institutional Equities Research
Exhibit 3: One-year forward P/BV
Exhibit 4: Three-year moving average P/BV
(x)
30
(x)
30
25
25
20
-2SD
20
15
15
10
Current P/BV
Avg.P/BV
2SD
-2SD
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
Jun-12
Dec-12
Jun-11
-1SD
Dec-11
Jun-10
Dec-10
Jun-09
Dec-09
Jun-08
1SD
Dec-08
Jun-07
Dec-07
Jun-06
Dec-06
Jun-05
Dec-05
Jun-04
Dec-04
5
Dec-03
(5)
Jun-03
10
Dec-02
3-yr moving avg
3-yr avg PB
1SD
2SD
-1SD
-2SD
Castrol India
Investment Arguments
Renewed focus to capture market share
Castrol India adopted a marketing strategy to exit from low-profit segments since 2005, reducing supply,
particularly to Indian Railways and other government departments, in order to focus on high-margin business.
The companys focus lies more on value rather than volume to drive earnings and expand margins. This has
led the gross margin to expand to Rs62.0/litre in CY11 from Rs26.1/litre in CY06. The companys
understanding on price elasticity (till the premium on its products remains in the range of 20%-25% it
maintains market share of ~22%-23%, but reneges it once it crosses 30%-35%) bodes well for it to deploy a
well balanced pricing strategy.
Our interaction with industry experts/dealers/automobile mechanics indicated the company regained
market share at ~22% in September 2012 after shedding almost 200bps in the past 18 months after
the premium pricing level on its products touched 30%-35%. The company is gaining market share on
account of: (1) Price premium moderating in the band of 20%-25%, (2) Competitors increasing
product pricing pressure in the wake of rising costs and (3) The company launching low-premium
products like Activ Go for bikes and RX Super for commercial vehicles to mark its presence at the
top-end of mid-sized product segment.
Castrol Indias market share in bazaar trade remained stable in the past two quarters at 21.9% (touching a
low of 21.0% in 3QCY11) after the company revised its pricing strategy and renewed focus on capturing lost
market share. It has further decided to revisit it whenever the price premium compared to rivals products
tops 25%. We believe the 20%-25% premium pricing strategy will continue to work despite rising
competition (there are ~66 organised companies in the fray in the lubricant market) on account of the
following: (1) Unlike fast moving consumer goods (FMCG), most consumers of engine oils face
downtime costs if their equipment/machinery remain idle or work less efficiently, and (2) Downtime
costs risk make commercial vehicle, tractor and construction equipment owners switch to reliable
and branded engine oils and also be more willing to pay a higher price for an established brand.
Castrol India, as of end September 2012 quarter, had volume market share of 21.9% and revenue
market share of 26.0%. Revenue market share of Castrol India remained in the range of 25%-27% from
4QCY09 to 3QCY12 and almost constant at 26% over the past four quarters. Castrol India maintaining
its volume market share and revenue market share shows: (1) The company maintaining volume market
share in a declining volume growth environment indicates that lower volume is an industry-wide phenomenon
following the change in engine technology and smaller sump size, and (2) The company plays a role in
deciding the pricing regime of the industry alongwith the margins of its competitors.
We believe the market share of Castrol India will improve from the current level after it launched low-premium
products to grab volume in the motorcycle and commercial vehicle space. In the motorcycle segment, the
company launched Activ Go and in the commercial vehicle segment RX Super, priced close to that of its
nearest competitor. The strategy to launch these products is to mark their presence at the top end of the midtier segment to grab market share and maintain brand positioning.
Exhibit 5: Market share by volume
(%)
70
60
50
40
21
21
22
22
1QCY12
2QCY12
21
4QCY11
4QCY10
23
3QCY11
23
2QCY11
23
1QCY11
21
3QCY10
23
2QCY10
24
1QCY10
20
4QCY09
30
22
10
BPCL
Castrol
Gulf Oil
Savita Oil
Shell
Tide Water Oil
3QCY12
Total
Source: Industry, Nirmal Bang Institutional Equities Research
Castrol India
Exhibit 6: Market share by value
(%)
70
60
50
40
25
26
26
26
1QCY12
2QCY12
26
4QCY11
4QCY10
27
3QCY11
27
2QCY11
26
1QCY11
25
3QCY10
25
2QCY10
27
1QCY10
20
4QCY09
30
26
10
BPCL
Castrol
Gulf Oil
Savita Oil
Shell
3QCY12
Tide Water Oil
Total
Exhibit 7: Dealer/mechanic survey*
Customer awareness promotes sales of Castrols products

Castrol advertisements more focused and thus attract customer attention than rivals
Sustained advertisement campaigns remain critical to drive retail sales
Customer seeking efficiency/quality prefer buying Castrol products
Customer perception on quality assurance is most critical for purchase decision
Activ 4T (2W), GTX (passenger car) and CRB(CV) are top-selling products of Castrol
Volume growth quite buoyant in two-wheeler and passenger car segments, but subdued in commercial vehicle space
Companys experiment of recommending Magnatec has helped taxi-owners
Companys terms/conditions for credit period/cash discounts tighter than those of rivals
Discount coupons critical for purchase recommendation from small automobile mechanics
Credit period of Castrol 30 days compared to 45-60 days of competitors
Castrol dealers expect 5%-6% volume growth, lower than what dealers of Veedol/Valvoline/Savita oil expect
Tractor volume growth picks up from October 2012
Shell/Petronas offering more discounts/favourable credit conditions to grab market share
Source: Nirmal Bang Institutional Equities Research

*Note: We conducted one to one survey conducted in vicinity of Parel, Dadar, Mahim, Thane, Wadala; Telephonic survey
conducted in Delhi, Jodhpur, Aligarh
Exhibit 8: Castrol Indias volume growth guidance

Year
Volume market share

(%)
2011
2010
2009
2008
2007
22
20
20
21
21
Industry volume growth (%)

Lower end
Upper end
2
3
1
(1)
-
3
4
2
(2)
>3
Volume guidance for next year (%)

Lower end
Upper end
3
3
2
4
4
3
Source: Annual reports, Nirmal Bang Institutional Equities Research
Exhibit 9: Price comparision

Four-wheeler
Grade
Price (Rs/litre)
Pennzoil
Veedol
Servo (IOC)
MAK(HPCL)
Castrol
Apar Chemicals
Lavas(local)
Mobil
15W40
15W40
15W40
15W40
15W40
15W40
15W40
15W40
242
211
267
230
294
269
180
208
Castrol India
Exhibit 10: Price comparision
Two-wheeler
Grade
Price (Rs/litre)
Veedol
Castrol
Racer4(HPCL)
Servo (IOC)
Apar Chemicals
BPCL
20W40
20W40
20W40
20W40
20W40
20W40
245
266
250
255
242
251
Exhibit 11: Prices of Castrol Indias key products (landed prices at dealer-end)
Four-wheeler
210 litre
50 litre
7.5 litre
5 litre
4 litre 3.5 litre
Castrol Magnatec
Castrol Magnatec 5W-30
GTX Petrol
GTX Diesel
Two-wheelers
Active 4T 20W-40
Active Go
Heavy vehicles
CRB Turbo
CRB Plus
Diesel Oil SAE-40
70,640
67,295
53,252
49,424
210 litre
49,332
210 litre
54,999
54,008
52,752
17,969
12,561
50 litre
11,746
12,600
50 litre
13,250
13,005
12,744
2,029
20 litre
4,757
20 litre
5,198
5,152
1,334
1,355
4 litre
15 litre
4,064
-
1,436
1,260
1,479
1,297
1,067
900
1,089
1 litre 900 ml
235
220
216
198
10 litre 7.5 litre
2,747
2,070
2,646
1,991
1,951
3 litre 2.5 litre

1,092
1,125
801
800 ml
5 litre
1,413
1,350
1,325
500 ml
3 litre
847
818
-
1 litre 500 ml
186
190
269
137
294
350ml 40 ml
1 litre 500 ml
295
272
141
269
-
Volume growth, palpable signs of recovery visible

We expect volume to grow 2.4%/3.4% in CY13E/CY14E after posting negative volume growth in
CY11/CY12E. We have projected the company to report volume of 208mn/213n/220mn litres in
CY12E/CY13E/CY14E, respectively. We expect volume CAGR at 1.9% over CY11-CY14E compared to
0.43% over CY09-CY12E.
Exhibit 12: Volume ramp-up
Exhibit 13: Volume CAGR
(mnltrs)
230
(mnltrs)
8
225
220
215
210
205
200
Lubricants
Total volume
Traded items (RHS)
CY14E
CY13E
CY12E
CY11
CY10
0
CY09
185
CY08
190
CY07
CY06
195
(%)
3
2
1
0
CY06
CY07
CY08
CY09
CY10
CY11
CY12E CY13E CY14E CY15E
(1)
(2)
(3)
(4)
Castrol India
Exhibit 14: Quarterly volume growth
Exhibit 15: Annual volume growth

(%)
30
25
20
15
10
5
0
(5)
(10)
(15)
(20)
(25)
(mnltrs)
70
60
50
40
30
20
10
1QCY08
2QCY08
3QCY08
4QCY08
1QCY09
2QCY09
3QCY09
4QCY09
1QCY10
2QCY10
3QCY10
4QCY10
1QCY11
2QCY11
3QCY11
4QCY11
1QCY12
2QCY12
3QCY12
4QCY12E
1QCY13E
2QCY13E
3QCY13E
4QCY13E
Sales volume
YoY (RHS)
QoQ (RHS)
(mnltrs)
230
(%)
8
225
220
215
210
205
(2)
200
(4)
195
190
(6)
CY06
CY07
CY08
CY09
Total volume
CY10
CY11
CY12E CY13E CY14E
Total volume growth (RHS)
Of the last seven years, Castrol India reported decline in volume growth for five years, except for CY05 and
CY10. Even in CY12E, volume is expected to be marginally negative at 207.6mn litres (implying a decline of
0.5% YoY). Industry volume growth has been lower, in the range of 3%-4% since CY04 due to the following
reasons: (1) Change in engine technology, which led to lower lubricant consumption and higher drain interval,
and (2) Reduction in sump size of engines. The consumption of lube oil can be gauged from the fact that
drain interval of trucks/buses has elongated to 36,000km from 18,000km in the last six-seven years, which
effectively tapered down volume growth although the decline was arrested by robust growth in light
commercial vehicles.
We expect the volume in Indias lubricant market to post a CAGR of 3% over CY12-CY15E at 2.05mt
from 1.85mt on the back of: (1) Commercial vehicles expected to show a CAGR of 9% over FY12FY15E, (2) Passenger cars likely to post a CAGR of 7% over FY12-FY15E, (3) Tractors expected to
post a CAGR of 12% over FY12-FY15E factoring in economic revival in the second-half of FY14,
interest rates likely to ease from FY14 and likely softness in petrol prices.
We have projected volume CAGR of 1.9% over CY12E-CY14E at 222mn litres from 207.6mn litres in CY12E.
The companys management expects lubricant volume to post a CAGR of 3%-4% over the next three years,
1.0%-1.5% higher than the industrys growth. We have assumed Castrol Indias volume to grow slower than
the industry average with competition getting tougher from Shell and Petronas. Shell with a market share of
~6% aims to touch its global market share level of ~12% in India. Petronas has initiated an aggressive
marketing strategy for dealers to push its products following its aim of achieving a dominant position in
emerging markets.
We expect Castrol India to achieve volume of 207mn/213mn/222mn litres in CY12E/CY13E/CY14E,
respectively. We believe the volume growth would be driven by: (1) Rising exposure of the company to
the personal mobility segment (on YTD basis, retail/workshop volume grew 7% offseting industrial
volume decline), (2) The companys renewed focus to capture market share by offering low-premium
products, (3) Growing penetration of Hub & Spoke model in commercial vehicles, where volume
growth in LCVs will arrest the decline in volume from HCVs, and (4) Increased focus on small towns
and rural areas, a key growth market in the personal mobility space, alongwith its plan to increase its
footprint in the tractor segment business.
In times of slower economic growth (reflecting on lower volume from the industrial sector viz. mining,
construction, off-highway equipment, marine etc), the company is increasing exposure towards the personal
mobility segment (comprising motorcycles/passenger cars) to mitigate the risk of slowing commercial vehicle
segment, which historically has been a key segment for the company. Passenger cars and motorcycles
currently constitute ~35% of total sales volume of Castrol India and diesel engines ~40% of sales volume.
The company has been increasing its efforts to tap further potential from passenger cars and motorcycles by
means of advertising campaign and interaction with motor mechanics. The company has devised a threepronged exercise to further penetrate the personal mobility segment comprising: (1) Studying the
price elasticity of demand for its products so as to decide the quantum of cost increases to be
passed on to consumers, (2) Price elasticity has been lower as the savings on switching to cheaper
brands as a percentage of total servicing cost is negligible, (3) Training and financial support to
automobile mechanics who are key promoters of the companys products.
Castrol India
In order to regain focus on volume rather value and reclaim lost market share, the company adopted a
strategy to launch products at the top range of the mid-tier pricing segment, where product premium is 10%15% higher than rivals compared to 20%-25% on other products. Castrol India has launched Activ Go for
motorcycles and RX Super for commercial vehicles.
The company believes the growth in organised retail and the evolving Hub & Spoke model would lead to
higher growth in the LCV segment in the medium term, offsetting the decline in the M/HCV segment. As per
CRISIL Research estimate, LCV volume is likely to grow 13%-15% in FY13E, although the M/HCV segment
is expected to show a decline of 12% to 15% in the same year. We believe the LCV/MHCV ratio is
structurally low in India and the segment is least impacted by economic downturn, as it is still underpenetrated.
Exhibit 16: Drain interval of vehicles and annual engine oil requirements
Drain interval
(km)
18,000
36,000
8,000
12,000
3,000
Vehicle type
Old CV
New CV
LCV
Passenger car
Motorcycle
Sump size
(litre)
20.0
15.0
7.5
4.0
1.0
Annual distance
(km)
70,000
100,000
40,000
12,000
4,000
Frequency of
replacement (x)
3.9
2.8
5.0
1.0
1.3
Engine oil requirement

(litre/year)
77.8
41.7
37.5
4.0
1.3
Exhibit 17: LCV-MHCV ratio structurally low in India

(x)
9
Exhibit 18: Sub-one tonne vehicle, pick-up truck gain share

(%)
100
90
80
70
60
50
40
30
20
10
0
2005-06
0
India
China
Brazil
UK
USA
Source: Crisil Research
2006-07 2007-08 2008-09 2009-10

Sub-one tonne vehicle
Pick-up truck
2010-11 2011-12 2012-13E

Upper-end vehicle
Source: Crisil Research
Exhibit 19: Cumulative vehicles sales volume

(mn units)
160
140
120
100
80
60
40
20
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 E FY13E FY14E FY15E
Commercial vehicle
Passenger car/Utility vehicle/Multi-purpose vehicle Two-wheeler
Castrol India
Exhibit 20: Castrol Indias sales volume by application
Exhibit 21: Castrol Indias sales by engine configuration
Industrial/ Marine,
14
Others, 25
Off highway/
Industrial/ Firstfill
OEM, 10
Diesel, 40
Passenger car, 15
Retail/ Workshop,
76
Motorcyle, 20
Exhibit 22: Lubricant market - consumption pattern
Exhibit 23: Lubricant market - point of sales
Agriculture pumps,
Genset, 2
5
Three-wheeler, 3
Others, 10
Two-wheeler, 10
Workshop, 15
Repair shop/local
mechanic, 53
Tractors, 13
Commercial
vehicles, 62
Local lube shop,

22
Passenger cars, 5
Exhibit 24: Management commentary on volume growth

2011
Market likely to witness volume growth of 2-3% on demand driven by four-stroke motorcyles, passenger cars
Market likely to grow by around 3%-4% in volume terms in 2012E, two-wheeler/Passenger cars may see sales at
15mn units in the next four years
2010
Market expected to witness volume growth of 3%-4%
2009
Lubricant industry expected to grow 1%-2%, market to see volume growth after initial no-growth projection
2008
Overall market to shrink by about 1%-2%, oil drain interval of CVs doubles in 2006
Emergence of semi-synthetic and synthetic oil recommended by passenger car OEMs.
Oil drain and synthetic oil expected to have significant impact on volume in automotive lubricants
Tata Motors introduces new oil drain specifications for H&MCV, lubricant market volume growth seen over 3%
Engine oil drain interval doubles to 36,000km and transmission oil drain intervals up at 72,000km
Drain interval to double, OEM dealership volume of CVs is 50% of current volume, projected growth would be
around 2%-3% in volume terms
Lubricant market is expected to grow by around 3%.
2007
2006
Source: Annual reports, Nirmal Bang Institutional Equities Research
The exhibit above elucidates the managements view of tepid volume growth that it has been expecting over
the years. This line of commentary is in sync with our view of moderating industry-wide volume growth due
to technology advancement.
Exhibit 25: Declining trend in lube consumption more visible in developed markets
Year
2011
2010
2009
2008
2007
Consumption
(mmt)
35.1
34.5
32.2
36.0
37.1
Asia Pacific &

North/South
RoW (mmt) America (mmt)
18.3
9.8
17.6
9.7
16.7
8.7
17.6
10.1
16.3
11.1
Europe
(mmt)
7.0
7.2
6.8
8.3
9.7
Asia Pacific &

RoW (%)
52.1
51.0
51.9
48.9
43.9
North/South
America (%)
27.9
28.9
27.0
28.1
29.9
Europe
(%)
19.9
20.9
21.1
23.1
26.1
Source: Fuchs Lubricants, Nirmal Bang Institutional Equities Research
Castrol India
Exhibit 26: Competition perception on growth
Gulf Oil
Overall volume growth of 2-3% in 2013

Bazaar market segment growth expected to be 5%-6% in 2013
Focus on new generation diesel oil and motorcycle segment
Volume growth to be dominated by more price discounts/promotions
Plans to invest 15% of turnover to capture market share, plans to double market share in the next three years
Apar
Sees two-wheeler CAGR of 3.5-4.0% and 2.3%-2.4% CAGR in PCV in the next three-four years
CV volume would be driven by expansion in ultra light LCVs (below 3tn)
Total market size likely to grow 2.15mnt by 2015E, implying CAGR of 5.1%
Possibility of down-trading to grab market share.
Exhibit 27: Indian versus global lubricant market

Indian lubricant market
One of most competitive lubricant markets
Estimates revenue size of Rs250bn, with total volume of
1.85mnt in FY12E
Current installed capacity of 2.2mmt
India is fifth largest lubricant market in the world after the US,
China, Russia and Japan
Automotive sales contribute ~65% to total sales, with the rest
being contributed by the industrial segment
India has about 1,200 manufacturers of lubricants out which
1,100 are SMEs
Semi-synthetic/synthetic both market currently having sales of
Rs20bn
Global lubricant market
Demand in 2011 rose by just under 2% at 35.1 mmt

Global volume remains at around 1mmt (-2.5%) below
the 2008 level
China and the US remain two largest markets,
accounting for one-third of global consumption
Except China and India, no other country in top 20
lubricant countries exceeded their 2011 volumes level
relative to 2008
Turkey witnessed highest increase in consumption
among the 20 countries in 2011(up 6.7%)
Exhibit 28: Castrol India versus CV quarterly sales volume

(%)
30
25
20
15
10
5
0
(5)
(10)
(15)
(20)
(25)
(%)
150
100
50
Exhibit 29: Castrol India versus CV annual sales volume

(%)
8
(%)
200
150
100
2
0
(50)
(2)
(100)
(4)
2QCY07
3QCY07
4QCY07
1QCY08
2QCY08
3QCY08
4QCY08
1QCY09
2QCY09
3QCY09
4QCY09
1QCY10
2QCY10
3QCY10
4QCY10
1QCY11
2QCY11
3QCY11
4QCY11
1QCY12
2QCY12
3QCY12
Castrol volume QoQ growth
50
0
(50)
(6)
(100)
CY03
Commercial vehicles (RHS)
CY04
CY05
CY06
CY07
CY08
Castrol volume growth YoY
CY09
CY10
CY11
Commercial vehicles (RHS)
Exhibit 30: Sales growth across segments

(%)
40
30
20
10
FY15E
FY14E
FY13E
FY12 E
FY11
FY10
FY09
FY08
FY07
FY06
(10)
FY05
(20)
(30)
Commercial vehicle YoY

Passenger vehicle YoY
Tractors YoY
Two-wheeler YoY
Castrol India
Gross margin spread to rise
We expect gross margin spread at Rs62/Rs66/Rs70 per litre in CY12E/CY13E/CY14E, respectively,
compared to Rs62/litre in CY10/CY11. The company witnessed a continuous uptrend in gross margin on per
litre basis from 1996, except for one instance in CY02. We see gross margin moving up on: (1) Change in
product mix more towards synthetic/semi-synthetic engine oils, (2) Launch of Professional range of
synthetic engine oil priced 25%-30% higher than conventional products, (3) The company playing a
pivotal role in deciding the prices, being the market leader in bazaar trade with rivals taking cues on
pricing from it, (4) Price hike of Rs5/litre in March-June 2012 to moderate the twin blow of rupee
depreciation and high base oil prices, and (5) Most new cars/bikes/commercial vehicles being based
on synthetic/semi-synthetic technology
We have projected gross margin at Rs62/Rs66/Rs70 per litre in CY12E/CY13E/CY14E, respectively on
the basis of our perception of the companys ability to absorb rupee depreciation (our house call pegs rupeeUS dollar exchange rate at Rs54.5/$/Rs55.5/$ for FY13E/FY14E, respectively). We expect EBITDA margin at
18.8%/19.6%/22.0% in CY12E/CY13E/CY14E, respectively largely due to the rupee factor.
Gross margin per litre will also be dependent on how prices of raw materials and additives pan out. For base
oil, we have projected the prices using the regression model to base oil prices in US$/mt to Brent crude oil
prices in US$/bbl. We have assumed Brent crude oil to average US$105/bbl in CY13E and US$100/bbl in
CY14E, with intercept of 247.43, standard error of 5% and slope of 8.35 to arrive at a valuation of
US$1,244/US$1,199 per mt for base oil in CY13E/CY14E, respectively.
Exhibit 31: Upcoming base oil plant maintenance/shutdowns
Refiner
Idemitsu
GS Caltex
Petronas
HollyFrontier
Luberef
Location
Japan
South Korea
Malaysia
US
Saudi Arabia
Duration
April May 2013
January February 2013
January 2013
December 2012
December 2012
Capacity (tn/yr)
305,000
26,000 bpd
330000
490000
270000
Exhibit 32: Yearly gross spread
Exhibit 33: Quarterly gross spread

(Rs/ltr)
70
(Rs/tr)
80
70
60
60
50
50
40
40
30
30
20
20
10
10
10
3QCY12
2QCY12
1QCY12
4QCY11
3QCY11
2QCY11
1QCY11
4QCY10
3QCY10
2QCY10
1QCY10
4QCY09
3QCY09
2QCY09
1QCY09
4QCY08
3QCY08
2QCY08
CY14E
CY13E
CY11
CY12E
CY10
CY09
CY08
CY07
CY06
CY05
CY04
CY03
CY02
CY01
CY00
CY99
CY98
CY97
CY96
1QCY08
Castrol India
Exhibit 34: Cost trend
Exhibit 35: Cost trend
(%)
80
(%)
70
70
60
60
50
40
50
30
40
20
30
10
20
10
(10)
CY03
CY04
CY05
CY06
CY07
CY08
CY09
CY10
CY11
(20)
0
CY03
CY04
CY05
CY06
CY07
Base oil
CY08
CY09
Additives
CY10
CY11
(30)
Packaging
Base oil YoY
AdditivesYoY
Exhibit 36: Brent crude, base oil correlation
Exhibit 37: Standard deviation-Base oil and crude oil
(Rs/bbl)
12,000
(x)
0.6
10,000
0.4
0.2
8,000
0.0
6,000
(0.2)
4,000
(0.4)
Base oil
Brent crude
Dec-12
Apr-12
Aug-12
Dec-11
Apr-11
Aug-11
Dec-10
Apr-10
Aug-10
Dec-09
Apr-09
Aug-09
Dec-08
Apr-08
Aug-08
Dec-07
(0.8)
Apr-07
Aug-07
(0.6)
Dec-06
2,000
Exhibit 38: Spread-Base oil and crude oil
Exhibit 39: Regression analysis-crude oil, base oil

(US$/bbl)
1,600
1,400
1,200
1,000
800
600
400
200
0
40
60
80
100
Base oil
120
Crude oil
140
160
The growing divergence between base oil and Brent crude highlighted in Exhibit 37 and Exhibit 38 is on
account of an increase in the number of outages that base oil producing refineries witnessed in the current
CY. This trend is also reflected in Exhibit 39 where the calculated standard error works out to ~16%. We
foresee a correction in the coming year, with the standard error reverting to 5% as more units resume
production. Consequently, the correlation portrayed in Exhibit 36 should also strengthen.
11
Castrol India
Earnings growth to turn positive
We expect earnings growth of 13%/16% in CY13E/CY14E, respectively, after witnessing negative
growth in the past two years and also RoE to improve to 73%/78% in CY13E/CY14E compared to 69%
in CY12E. The management has reiterated its stand to defend the margins in the range of 23%-24% in
a volatile exchange/crude oil situation and so we expect EBITDA margin at 20%/22% in CY13E/CY14E,
respectively.
Exhibit 40: Revenue trend
Exhibit 41: Profitability trend
(Rsmn)
40,000
35,000
30,000
25,000
(%)
25
(Rsmn)
6,000
(%)
50
20
5,000
40
30
4,000
15
20,000
20
3,000
10
PAT
YoY (RHS)
YoY (RHS)
Exhibit 42: EBITDA margin trend
Exhibit 43: RoE trend
(%)
28
CY14E
CY13E
CY06
CY14E
CY13E
CY12E
CY11
CY10
CY09
CY08
CY07
Net sales
CY12E
(20)
CY11
CY10
(10)
CY06
1,000
CY09
5,000
CY08
10,000
10
2,000
CY07
15,000
(%)
100
26
90
24
22
80
20
70
18
60
16
14
50
12
40
EBITDA margin
CY14E
CY13E
CY12E
CY11
CY10
CY09
CY08
CY07
CY06
10
30
CY06
CY07
CY08
CY09
CY10
RoAE
5-year average
CY11
CY12E
CY13E
CY14E
5-year average
We assign a Buy rating to the stock

We have assigned a Buy rating to the stock with a target price of Rs349 using weighted average
methodology to capture medium to long-term potential. We have given 60% weight to PE and a 20%
weight each to discounted cash flow/Gordon dividend methodology(Cost of equity 11.5%, Beta 0.5, ERP
7%). We have assigned PE of 30xCY14E earnings (compared to two-year average of 27x) to reflect: (1)
Volume CAGR of 1.9% over CY11-CY14E compared to 0.5% over CY09-CY11, (2) Margin expansion of
300bps likely over CY12E-CY14E,(3) Regaining market share via launch of low-premium products and
readjustment of premium pricing (4) BP(British Petroleum) as parent would help company to launch most
innovative product line to taken on competition and strengthen relationship with OEMs.
Exhibit 44: Castrol India valuation

Weighted average method for fair value computation
PE
Gordon dividend discount
DCF value
Weighted average
Weight (%)
Value (Rs/share)
60
20
20
-
346
350
360
349
Valuation methodology
-Assigned PE multiple of 30x CY14 EPS
-Dividend growth in perpetuity at 3.0%, WACC at 11.5%
-WACC at 11.5% and terminal growth at 3.0%
12
Castrol India
We believe Castrol India should sustain 30x multiple for CY14E due to the following reasons: (1) The
companys price leadership position in the industry, which helps reduce its vulnerability to pressure
on margins, (2) Rise in gross margin/litre despite the fall in volume from 2000 onwards (except one
instance in 2002), (3) Lubricant industry, which has been growing in low single-digit, is expected to
grow at the same pace, which means the pivotal indicator of earnings quality should be sales per litre
rather than absolute volume growth for Castrol India, (4) MNC parentage should reflect in higher PE
multiple like that of Nestle India and GlaxoSmithKline Consumer, (5) Earnings growth of 13%/16%
likely in CY13E/CY14E should result in RoE expansion to 73%/79%, respectively, compared to 69% in
CY12E, (6) Volume growth in sport utility vehicle, multi-utility vehicle and sedan segments, key
consumers of synthetic/semi-synthetic oils, would lead to improvement in gross margin, and (7) The
company having one of the most extensive dealer networks with 270 dealers and 70,000 retail outlets
and increased focus on the rural segment, which is likely to turn a major market by the end of 2015.
We believe the business model of lubricant market largely resembles that of the FMCG market in terms of
distribution, sales pitch and a bit of price elasticity and so Castrol India deserves the valuation of FMCG
companies.
Exhibit 45: Castrol India, FMCG companies business model
Refiner
Brand premium
Wide dealer network
High dividend payout
High RoE
High advertising/sales promotion expenses
Dealer discount to drive sales
Castrol India
Yes
Yes
Yes
Yes
Yes
Yes
FMCG companies
Yes
Yes
Yes
Yes
Yes
Yes
Castrol India stock currently trades at 30x/25.7x CY13E/CY14E earnings, respectively, and so we broadly
see the companys business model matching that of FMCG companies but the valuation multiple has
remained at a discount for FMCG players in the absence of volume growth. As we stated earlier, volume for
the lube industry has been muted on account of the change in engine technology and smaller sump size of
engines, hence an important parameter to gauge the earning quality should be both market share in volume
and revenue share.
In order to see how FMCG companies PE multiple has moved in times of lower/flat volume growth, we have
tracked the PE multiples of Hindustan Unilever, ITC, Marico and Godrej Consumer Products with their
respective volume growth. In case of each of the companies selected from our sample FMCG basket
valuations seem to move in tandem with their respective volume growth. The trend is particularly visible since
the beginning of CY12.
Exhibit 47: ITC price versus volume trend
22
15
150,000
20
10
145,000
18
2sd
-1sd
-2sd
P/E
Volume (RHS)
13
('000 kg)
70,000
65,000
28
60,000
26
55,000
24
50,000
P/E
2sd
-1sd
-2sd
Jun-12
Aug-12
Apr-12
Feb-12
Oct-11
Dec-11
Jun-11
Aug-11
Apr-11
Feb-11
Oct-10
1sd
Dec-10
Aug-10
45,000
Apr-10
Jun-10
1sd
Jun-12
155,000
Aug-12
160,000
20
Apr-12
25
Feb-12
165,000
Oct-11
30
Dec-11
30
Jun-11
170,000
Aug-11
35
Apr-11
32
Feb-11
175,000
Dec-10
40
Oct-10
(x)
34
Aug-10
('000 kg)
180,000
Apr-10
(x)
45
Jun-10
Exhibit 46: Hindustan Unilever price versus volume trend
Volume (RHS)
Castrol India
Exhibit 49: Godrej Consumer price versus volume trend
('000 kg)
12,500
(x)
32
12,000
30
11,000
2sd
-1sd
-2sd
26
9,000
24
8,500
22
P/E
Volume (RHS)
1sd
2sd
-1sd
Jun-12
-2sd
Aug-12
Apr-12
Feb-12
Oct-11
Dec-11
Aug-11
Apr-11
Jun-11
7,500
Feb-11
18
Dec-10
9,500
8,000
Oct-10
20
Apr-10
10,000
Aug-12
Apr-12
Jun-12
Feb-12
Oct-11
Dec-11
Jun-11
Aug-11
Apr-11
Feb-11
Oct-10
Dec-10
Jun-10
Aug-10
Apr-10
10,500
1sd
9,500
28
11,500
P/E
('000 kg)
10,000
Aug-10
(x)
32
31
30
29
28
27
26
25
24
23
22
Jun-10
Exhibit 48: Marico price versus volume trend
Volume (RHS)
We have valued Castrol India on weighted average basis to capture the PE multiple potential in the medium
term to long-term. We have given higher weight given to PE multiple to capture the medium-term impact of
revival in volume growth, margin expansion and DCF/Gordon dividend discount to capture (free cash flow
generation of Rs20,819mn likely over CY11-CY14E and dividend payout averaging 83% over CY03-CY11).
Exhibit 50: Castrol Indias three-year moving average
(x)
40
35
30
25
20
15
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
10
3-yr moving avg
3-yr avg.PE
1SD
2SD
-1SD
-2SD
Exhibit 51: Volume growth sensitivity

Impact in CY13
Revenue (Rsmn)
EBITDA (Rsmn)
PAT (Rsmn)
EPS (Rs/share)
Valuation (Rs/share)
(1.5)%
33,305
6,342
4,651
9.40
332
0.0%
33,791
6,513
4,766
9.63
339
1.5%
34,277
6,685
4,881
9.86
347
2.0%
34,439
6,742
4,920
9.94
349
2.5%
34,602
6,799
4,958
10.02
352
Impact in CY14
Revenue (Rsmn)
EBITDA (Rsmn)
PAT (Rsmn)
EPS (Rs/share)
(2.0)%
33,905
7,112
5,245
10.60
322
0.0%
34,571
7,362
5,413
10.93
332
2.0%
35,237
7,612
5,580
11.27
342
3.0%
35,721
7,793
5,701
11.52
349
4.0%
35,904
7,862
5,747
11.61
352
14
Castrol India
Exhibit 52: Gross margin sensitivity (Rs/ltr)
Impact in CY13 (Rs/ltr)
Revenue (Rsmn)
EBITDA (Rsmn)
PAT (Rsmn)
EPS (Rs/share)
60
33,193
5,539
4,114
8.31
62
33,609
5,940
4,382
8.85
64
34,024
6,341
4,651
9.40
66
34,439
6,742
4,920
9.94
68
34,855
7,143
5,188
10.48
Impact in CY14
Revenue (Rsmn)
EBITDA (Rsmn)
PAT (Rsmn)
EPS (Rs/share)
64
34,431
6,549
4,868
9.83
318
66
34,861
6,964
5,146
10.40
329
68
35,291
7,379
5,424
10.96
339
70
35,721
7,793
5,701
11.52
349
72
36,150
8,208
5,979
12.08
360
Exhibit 53: Target price sensitivity to exchange rate & gross margin (CY14)
Rs/ltr / Rs/US$
64
65
66
67
68
69
70
71
72
73
48
321
326
331
336
341
346
351
357
362
367
50
320
325
330
335
341
346
351
356
361
366
52
319
324
330
335
340
345
350
355
361
366
55
318
324
329
334
339
344
349
354
360
365
57
318
323
328
333
338
344
349
354
359
364
59
317
322
327
333
338
343
348
353
358
364
115
317
322
327
332
338
343
348
353
358
363
120
317
322
327
332
337
342
347
353
358
363
Exhibit 54: Target price sensitivity to Brent crude & gross margin (CY14)
Rs/ltr / US$/bbl
64
65
66
67
68
69
70
71
72
73
95
319
324
329
334
339
345
350
355
360
365
100
318
324
329
334
339
344
349
354
360
365
105
318
323
328
333
339
344
349
354
359
364
110
317
323
328
333
338
343
348
354
359
364
15
Castrol India
Financials
Exhibit 56: Cash flow
Exhibit 55: Income statement

CY10
CY11
CY12E
CY13E
CY14E
Y/E December (Rsmn)
CY10
CY11
CY12E
CY13E
CY14E
Net sales
27,348
29,818
31,968
34,439
35,721
EBIT
7,403
7,179
6,516
7,363
8,530
% growth
18.0
9.0
7.2
7.7
3.7
364
(952)
(263)
589
994
Staff costs
1,029
1,078
1,153
1,211
1,272
Cash flow from operations
7,767
6,227
6,253
7,952
9,523
13,847
16,945
19,073
20,405
20,354
Other income
(395)
(846)
(752)
(851)
(975)
Adv.& sales prom. exp.
2,372
2,154
2,423
2,321
2,401
Depreciation
243
251
249
231
239
Others
2,849
3,057
3,307
3,760
3,901
Interest paid (-)
(24)
(19)
(20)
(20)
(20)
Tax paid (-)
(2,475)
(2,349)
(2,136)
(2,423)
(2,808)
Dividends paid (-)
(4,325)
(4,311)
(3,894)
(4,394)
(5,291)
Y/E December (Rsmn)
Raw materials
Total expenditure
(Inc.)/dec. in working capital
20,097
23,234
26,204
27,928
28,166
EBITDA
7,251
6,584
6,013
6,742
7,793
% growth
26.0
(9.2)
(8.7)
12.1
15.6
Net cash from operations
790
(1,047)
(300)
494
668
EBITDA margin (%)
26.5
22.1
18.8
19.6
21.8
Capital expenditure (-)
(54)
(256)
(110)
(110)
(110)
Other income
395
846
752
851
975
Net cash after capex
736
(1,303)
(410)
384
558
Interest costs
24
19
20
20
20
Inc./(dec.) in borrowings
(Inc.)/dec. in investments
Depreciation
Equity issue/(buyback)
1,236
Cash from financial activities
1,242
(1,043)
600
566
851
975
Opening cash
5,258
6,193
5,490
5,646
6,881
Closing cash
6,193
5,490
5,646
6,881
8,414
935
(703)
156
1,235
1,533
243
251
249
231
239
7,378
7,160
6,496
7,343
8,510
27
(3)
(9)
13
16
2,475
2,349
2,136
2,423
2,808
33.5
32.8
32.9
33.0
33.0
Net profit
4,903
4,811
4,359
4,920
5,701
% growth
28.7
(1.9)
(9.4)
12.8
15.9
Change in cash
EPS (Rs)
9.9
9.7
8.8
9.9
11.5
DPS (Rs)
7.5
7.5
6.8
7.7
9.2
Payout (%)
75.7
77.1
77.0
77.0
80.0
Profit before tax

% growth
Tax
Effective tax rate (%)
Others
Exhibit 58: Key ratios
Exhibit 57: Balance Sheet

Y/E December (Rsmn)
CY10
CY11
CY12E
CY13E
CY14E
Y/E December
CY10
CY11
CY12E
CY13E
CY14E
Equity
2,473
2,473
2,473
2,473
2,473
Per share
Reserves
3,062
3,569
4,035
4,560
4,971
EPS
9.9
9.7
8.8
9.9
11.5
Net worth
5,535
6,042
6,508
7,033
7,444
Book value per share
11
12
13
14
15
10.4
10.2
9.3
10.4
12.0
11.1
7.8
8.6
11.4
13.8
Total loans
Dividend per share
Liabilities
5,535
6,042
6,508
7,033
7,444
Cash EPS per share
Gross block
2,955
3,066
3,186
3,296
3,411
Free cash flow per share

Valuation (x)
Depreciation
1,752
1,941
2,004
2,235
2,473
Net block
1,203
1,125
1,182
1,061
938
P/E
30.1
30.6
33.8
30.0
25.9
295
P/BV
26.6
24.4
22.6
21.0
19.8
EV/EBITDA
19.5
21.5
23.6
20.8
17.8
CWIP
166
Deferred tax assets
310
300
300
371
562
562
562
562
Inventories
2,442
3,009
3,553
3,634
3,625
Margins (%)
Debtors
1,784
2,190
2,628
2,831
2,936
EBITDA margin
26.5
22.1
18.8
19.6
21.8
8,414
Net profit margin
17.9
16.1
13.6
14.3
16.0
Cash
6,193
Other current assets
5,490
5,646
6,881
Asset-based ratios (%)
51
85
85
85
85
Loans & advances
1,158
1,262
1,262
1,262
1,262
RoAE
93.5
83.1
69.5
72.7
78.8
Total current assets
11,628
12,035
13,174
14,692
16,321
RoACE
93.8
83.3
69.7
72.9
79.0
Creditors
4,949
5,140
4,817
5,190
Provisions
2,884
2,852
3,894
4,394
5,383
5,291
Total current liabilities
7,833
7,991
8,711
9,584
10,673
Net current assets
3,795
4,044
4,463
5,108
5,648
Total Assets
5,535
6,042
6,508
7,033
7,444
16
Castrol India
Disclaimer
Stock Ratings Absolute Returns
BUY > 15%
HOLD 0-15%
SELL < 0%
This report is published by Nirmal Bangs Institutional Equities Research desk. Nirmal Bang has other business units with independent research teams separated by
Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. This report is for the personal information of the authorised
recipient and is not for public distribution. This should not be reproduced or redistributed to any other person or in any form. This report is for the general information
for the clients of Nirmal Bang Equities Pvt. Ltd., a division of Nirmal Bang, and should not be construed as an offer or solicitation of an offer to buy/sell any securities.
We have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical
information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be
subject to change from time to time without notice.
Nirmal Bang or any persons connected with it do not accept any liability arising from the use of this document or the information contained therein. The recipients of
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Direct Line
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AVP Sales
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Dealing Desk
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17
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Initiating Coverage

Geared For Growth

Sector: Oil & Gas

Mkt Cap (Rsbn/US$bn)

Daily Vol. (3M NSE Avg.)

Shareholding (%) 1QCY12 2QCY12 3QCY12

One Year Indexed Stock Performance

NSE S&P CNX NIFTY INDEX

Price Performance (%)

Please refer to the disclaimer towards the end of the document.

Exhibit 2: Three-year moving average P/E

3-yr moving avg

Source: Bloomberg, Nirmal Bang Institutional Equities Research

Source: Bloomberg, Nirmal Bang Institutional Equities Research

Exhibit 3: One-year forward P/BV

Exhibit 4: Three-year moving average P/BV

Source: Bloomberg, Nirmal Bang Institutional Equities Research

3-yr moving avg

Source: Bloomberg, Nirmal Bang Institutional Equities Research

Tide Water Oil

Source: Industry, Nirmal Bang Institutional Equities Research

Tide Water Oil

Source: Industry, Nirmal Bang Institutional Equities Research

Exhibit 7: Dealer/mechanic survey*

Customer awareness promotes sales of Castrols products

Source: Nirmal Bang Institutional Equities Research

Exhibit 8: Castrol Indias volume growth guidance

Volume market share

Industry volume growth (%)

Volume guidance for next year (%)

Source: Annual reports, Nirmal Bang Institutional Equities Research

Exhibit 9: Price comparision

Source: Industry, Nirmal Bang Institutional Equities Research

Source: Industry, Nirmal Bang Institutional Equities Research

4 litre 3.5 litre

3 litre 2.5 litre

Source: Industry, Nirmal Bang Institutional Equities Research

Volume growth, palpable signs of recovery visible

Exhibit 13: Volume CAGR

Traded items (RHS)

Source: Company, Nirmal Bang Institutional Equities Research

CY12E CY13E CY14E CY15E

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 15: Annual volume growth

Source: Company, Nirmal Bang Institutional Equities Research

CY12E CY13E CY14E

Total volume growth (RHS)

Source: Company, Nirmal Bang Institutional Equities Research

Engine oil requirement

Source: Nirmal Bang Institutional Equities Research

Exhibit 17: LCV-MHCV ratio structurally low in India

Exhibit 18: Sub-one tonne vehicle, pick-up truck gain share

Source: Crisil Research

2006-07 2007-08 2008-09 2009-10

2010-11 2011-12 2012-13E

Source: Crisil Research

Exhibit 19: Cumulative vehicles sales volume

Source: Nirmal Bang Institutional Equities Research

Exhibit 21: Castrol Indias sales by engine configuration

Source: Nirmal Bang Institutional Equities Research

Source: Nirmal Bang Institutional Equities Research

Exhibit 22: Lubricant market - consumption pattern

Exhibit 23: Lubricant market - point of sales