India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Equity Bottom-Up

Gulf Oil Lubricants India / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/13734" target="_blank" data-smartkarma-citation="entities:13734:1">Gulf Oil Lubricants India (GOLI IN)</a>  is the third largest lubricant player in the private sector that has 60% market share in a 2.5 mn tonne volume lubricant industry that is growing at 2-3% per annum. The company is owned by the Hinduja group, a global conglomerate that has 73% equity stake in the company.Notwithstanding 32 players including private and PSUs, the lubricant industry has exhibited a fairly strong financial discipline wherein the companies have usually passed on raw material volatility and inflation to the end consumer, a feature that is usually not witnessed in other sectors.The Industry volumes in the past were affected due to improving drain interval (total distance covered by the vehicle after which the oil has to be replaced) on improving engine technology and regular upgradation of lubricants. However, it seems to have peaked recently. Along with that a high growth outlook for the automobile industry, the largest lubricant consumer, may help fuel the growth of the lubricant industry going forward.Gulf intends to grow at 2-3x the industry growth by increasing its distribution reach that is far lower compared to the largest player, aggressive marketing and promotions, and a successful tie-up with OEMs that are growing faster than their peers in the automobile sector.ValuationThe company trades at an EV/EBITDA of 16x FY18, 15x FY19e and 12x FY20e EBITDA and a PE of 24x FY18, 23x FY19e, and 18x FY20e EPS which we believe is fairly valued due to a relatively higher volume growth compared to peers that has been recurring over the last few years, strong brand recall, balance sheet strength, high return ratios that may further improve and the potential of higher payouts due to low capital needs going forward.

Gulf Oil Lubricants India (GOLI IN)  is the third largest lubricant player in the private sector that has 60% market share in a 2.5 mn tonne volume lubricant industry that is growing at 2-3% per annum. The company is owned by the Hinduja group, a global conglomerate that has 73% equity stake in the company.Notwithstanding 32 players including private and PSUs, the lubricant industry has exhibited a fairly strong financial discipline wherein the companies have usually passed on raw material volatility and inflation to the end consumer, a feature that is usually not witnessed in other sectors.The Industry volumes in the past were affected due to improving drain interval (total distance covered by the vehicle after which the oil has to be replaced) on improving engine technology and regular upgradation of lubricants. However, it seems to have peaked recently. Along with that a high growth outlook for the automobile industry, the largest lubricant consumer, may help fuel the growth of the lubricant industry going forward.Gulf intends to grow at 2-3x the industry growth by increasing its distribution reach that is far lower compared to the largest player, aggressive marketing and promotions, and a successful tie-up with OEMs that are growing faster than their peers in the automobile sector.ValuationThe company trades at an EV/EBITDA of 16x FY18, 15x FY19e and 12x FY20e EBITDA and a PE of 24x FY18, 23x FY19e, and 18x FY20e EPS which we believe is fairly valued due to a relatively higher volume growth compared to peers that has been recurring over the last few years, strong brand recall, balance sheet strength, high return ratios that may further improve and the potential of higher payouts due to low capital needs going forward. 

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