Originally posted by manish_okhade
Monkey,
Can you pl share any valuation for CASTROL, Do they have any pricing power? |
Manish,
My take on Castrol:
Opportuity: Growth opportunity is not like a new or unpenetrated category. However, it should be reasonable to expect double digit top line growth for next few years, considering increasing automobile penetration.
I find any sector interesting where public sector dominates and there are few efficient private sector players. Lube oil business is one fitting this. Basically I think Castrol will improve its market share at the cost of public sector companies.
Threat will come when other MNCs like Shell, Total, Exxonmobil start in a big way in India. However, this does not seem imminent in next few years. If I start seeing aggresive marketing campaigns from few of such MNCs then I will rethink about prospects of Castrol.
Performance: The numbers are in public domain accessible to everyone. It is adequate to note that it is reasonable considering expectation of double digit top line growth.
Valuation: It is tricky part. Growth oriented investors will not like it as opportunity is not as big as some new or unpenetrated category whereas die-hard value investors will not like it as it will not come to the valuation levels they expect.
So, Castrol is not a value buy or growth play but can be considered as steady compounder.
If any one is making a growth oriented concentrated portfolio or if one is making a portfolio with deep value orientation, Castrol will not find place in such portfolios. However, if one is looking at building a diversified portfolio of say 20 or so companies with mix of growth plays, value buys and steady compounders, Castrol will find a place in such portfolio.
I have not mentioned any P/E numbers here as my normal approach is to buy when stock broadly fits into the requirement with little bit P/E here & there does not really matter in long term scheme of things.
Personally, I have Castrol in my portfolio. However, I am giving my portfolio a more growth bias nowadays. Hence, not bought more of Castrol since some time. However, for a portfolio I am building for my mother, I have added Castrol recently as I am looking for a diversified portfolio with mix of all plays.
Tide water oil is not fitting into my scheme of things better than Castrol. Hence, I am not considering it. I will review it if their need to retain so much earning comes down by improving efficiency.
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