Lubricant maker Castrol India Ltd’s March quarter earnings (Q1CY21) have exceeded analysts’ estimates.
Reported internet revenue stood at ₹243.6 crore, representing an virtually 95% enhance over the identical interval final yr. For perspective: Motilal Oswal Monetary Companies Ltd and Kotak Institutional Equities have been anticipating Castrol India’s internet revenue to be at ₹149.4 crore and ₹167 crore, respectively.
A beneficial base helped revenue progress as efficiency was adversely impacted in direction of the tip of the March 2020 quarter as a result of onset of the pandemic and the resultant slowdown in enterprise.
The low base however, revenues for this yr’s March quarter have been forward of expectations, driving the beat in earnings. Revenues elevated 66% year-on-year to about ₹1,139 crore, on robust quantity progress.
“Castrol India’s volumes for Q1CY21 stood at 61,000 kilo litre, representing a rise of 62.2% year-on-year and 17.3% sequentially,” mentioned Nidhi Doshi, analyst, Dolat Capital Market Pvt. Ltd. The corporate follows a January to December monetary yr.
Whereas Castrol noticed strong pent-up demand throughout the quarter, it stays to be seen whether or not this momentum sustains, going forward.
“Whereas Q2CY21 is powerful sometimes as a result of agri season, the covid-19 second wave may play spoilsport on demand and affect volumes adversely,” mentioned Doshi. The excessive base, coupled with regional lockdowns may nicely imply that efficiency might be on a slippery slope within the close to time period.
Castrol India’s earnings earlier than curiosity, tax, depreciation and amortization (Ebitda) margin expanded by about 470 foundation factors to 29.9% throughout the March quarter, because of the advantages of scale. One foundation level is 0.01%. Ebitda margin elevated sequentially as nicely.
To make sure, rising enter prices could weigh on margins going forward. Castrol India identified, “Provide disruptions on account of base oil and uncooked supplies availability, logistics challenges and rupee depreciation are more likely to adversely affect demand and provide.”
In the meantime, shares of Castrol India elevated round 2% on Tuesday on the Nationwide Inventory Change because of the robust March quarter outcomes.
Even so, the inventory has not fared nicely because the pandemic started, buying and selling about 20% decrease than the pre-covid highs seen in February 2020. The Nifty 50 index is presently about 20% increased, in comparison with highs in February 2020.