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Tuesday, March 2, 2010

Castrol - Evergreen Market Leader in Automobile Lubricants

Castrol is a market leader in lubricants industry in India. Checkout the odds of investing in stocks of Castrol at it's present level.

Castrol’s endurance in the Indian markets is a testimony to its leadership position in the lubricants industry over the past 20 years in a highly competitive situation. After liberalisation, almost every major lubricant brand entered India but Castrol’s brands (GTX, Super TT, CRB, Magnatec and Activ) are as strong as ever.

Castrol’s RoE has averaged 41% over the past five years, supported by a lucrative operating margin of 25%. Shareholders have benefited from total returns of 182% over five years. The stock hit a couple of major lows in the past five years.

These were the times to buy into it, as valuations were cheap at 1.5 times sales and 5 times operating profit. Moneylife had recommended to buy stocks at this level. It was at Rs296 then and is now at Rs616, a rally of 108%.

I suggest to keep watch on castrol and if it corrects along with markets, it would be advisable to buy stocks.

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