Castrol Stock Can Go Up With Launch of The Nano

2008 marked the presence of Castrol as a brand in India for 100 years. For a company which depends mainly on the auto sector, one would have expected that the company, given the poor state of the auto sector would have impacted margins of Castrol. The first half of the current year helped the company bear the impact of the slowdown in the second half, especially in the fourth quarter.
For the year ended 31st Dec 2008, its net sales for the year were up 17% at Rs.2216.80 crore. EBITDA was up 21% at Rs.441.60 crore. The company has maintained its margins almost at the same levels. OPM for year was at 19.92% as against 19.30% in previous year. This a good increase, given the 205 increase it had to face on cost of raw materials and marginal drop in volume sales too. The company ended the year with a net profit of Rs.262.30 crore, up by 20%. NPM was down at 8.71% from 10.68% in previous year.
The one very positive factor in favour of the company is that it has an exclusive tie-up with Tata Motors for its passenger and commercial vehicles, and will be an original equipment (OE) supplier and after-sales services provider to the Nano. It is also working on making a specialised low-cost fuel-efficient lubricant for the Nano and this is an exclusive lubricant. Very much under the wraps, this lubricant is expected to reduce emissions and ensure higher engine longevity in a competitive business environment.
The response to Nano and the new lubricant would, to a large extent decide the coming first quarter of FY10. With small and low cost cars being the norm, once this exclusivity agreement is over, with Ford and Bajaj also planning similar cars, maybe this would be its new milch cow. The stock is sure to see some spurt in the run up to the launch of the Nano in the coming days. thanks