An excellent really detailed report covers it all …
Some highlights
- Industry Leader
- Fantastic RoE, RoCE, etc ratios
- Excellent dividend yield provides downside protection
- Near-nil threat of competition/disruption from new players (I can bet they are not going to be softbank funded lubricant companies coming after them!)
- Excellent track record of decades
- MNC pedigree, clean books
- Ability to pass on price increases of raw materials, pricing power (limited, but it exists)
- Potential trigger: Reliance-BP petrol pumps (Castrol is basically a BP subsidiary and is now available at reliance fuelling stations)
Some Lowlights
- Barely any sales growth of late
- Electric vehicles
I very very strongly suggest you read the report linked above, it covers this and much more.
Also read:
- the Gulf Oil thread to know more about the industry - Gulf Oil Lubricants - A low risk way to play the economic cycle?
- Prof Sanjay Bakshi’s short note on Castrol (old article) - basically it’s a business which requires no further infusion of capital at all! “Castrol India Won’t Stop Investing in India” – Fundoo Professor
Disc: long, not expecting fireworks, but a steady appreciation. Defensive play in overheated markets.
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