Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Castrol India Ltd (BOM:500870, Financial) achieved a 6% volume growth in the first quarter of 2024.
- Revenue from operations increased by 2% year-on-year to INR1,325 crores.
- Net profit after tax rose by 7% year-on-year.
- The company expanded its reach into rural areas, making products available in over 33,500 outlets.
- Castrol India Ltd (BOM:500870) received prestigious awards for safety practices and plant efficiency.
Negative Points
- Operating margins compressed from 26% in the previous quarter to 22% in the first quarter of 2024.
- There was a sluggish start to the year with slow consumer demand impacting the mix of volumes.
- No significant price increases were taken during the first quarter, affecting margin growth.
- Increased competitive intensity in the Indian market could pose challenges.
- Other expenses rose by about 10% sequentially and year-on-year, partly due to increased travel and one-off costs.
Q & A Highlights
Q: What was the volume sold in this quarter, and what's the outlook for the rest of the year? Also, what were the reasons behind the margin compression in this quarter?
A: Volume grew by 6%, reaching 58 million liters. The market is expected to grow by 4-5%, and Castrol aims to grow above market levels. No significant price increases were made in the first quarter. Operating margins were around 22%, slightly lower than last year due to a sluggish start and a mix impact of 2% versus the volume growth of 6%. (Deepesh Baxi, CFO)
Q: Can we anticipate a 10% increase in EPS over the next few years?
A: We don't provide EPS guidance, but we aim to maintain operating margins in the range of 22-25% for the entire year. (Deepesh Baxi, CFO)
Q: How is Castrol India addressing the increasing competitive intensity in the market?
A: The competitive intensity is expected to increase, which is positive as it encourages better value for customers. Castrol has a 100+ year history in India and is well-prepared to compete. The company continues to invest in its brand, including signing Shah Rukh Khan as a brand ambassador. (Sandeep Sangwan, Managing Director)
Q: What is the percentage of revenue or volume from OMC channels?
A: OMC channels contribute about 16-20% of total volume, with the rest coming from industrial and aftermarket automotive channels. (Sandeep Sangwan, Managing Director)
Q: Can you provide insights into the non-lubricant business, particularly the Auto Care product segment and Ki Mobility?
A: The Auto Care products are available in over 50,000 outlets, with new products being introduced. Ki Mobility is expanding its network and improving customer loyalty. Both initiatives are progressing well. (Sandeep Sangwan, Managing Director)
Q: What are the major focus areas going forward: margins or volumes?
A: The focus is on driving top-line growth ahead of the category while maintaining EBITDA margins between 22-25%. This involves growing volumes and selling premium products. (Sandeep Sangwan, Managing Director)
Q: How are the new products for data center immersion cooling and EV fluids performing?
A: The EV fluids brand, Castrol ON, has been launched and is supplied to major OEMs. The data center thermal management solutions are in the proof-of-concept stage, with active partnerships and investments in R&D. (Sandeep Sangwan, Managing Director)
Q: What is the capacity utilization in each of Castrol India's plants?
A: The overall capacity utilization across the three plants is about 80%. (Deepesh Baxi, CFO)
Q: Can you provide a segment-wise volume breakdown for passenger, commercial vehicle, industrial, and personal mobility?
A: Personal mobility (cars and bikes) accounts for about 45%, commercial vehicles for 40%, and the rest is industrial. (Deepesh Baxi, CFO)
Q: What is the revenue model and potential for scaling up Castrol-branded service centers?
A: Castrol-branded service centers are independent workshops supported by Castrol through branding, training, and lubricant sales. The primary revenue comes from lubricant sales, and the focus is on building the Auto Care business. (Sandeep Sangwan, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
