CASTROLIND - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 4.2

🧾 Core Financials

Profitability: ROCE of 55.2% and ROE of 41.8% are exceptional, indicating highly efficient capital deployment and strong shareholder returns.

Earnings Growth: PAT grew modestly from ₹233 Cr to ₹244 Cr (5.1% QoQ), showing stability but not explosive growth.

EPS: ₹9.67 is solid for its price range.

Debt Profile: Debt-to-equity of 0.04 means the company is virtually debt-free—excellent for financial resilience.

Cash Flow: While not explicitly stated, consistent profits and minimal debt imply healthy operating cash flows.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 21.0 Slightly above industry average (18.8)

P/B Ratio ~11.0 High premium over book value

PEG Ratio 3.17 Overvalued relative to growth

Dividend Yield 4.18% Attractive for income-focused investors

Despite strong fundamentals, valuation is on the higher side, especially considering the PEG ratio and P/B.

🏭 Business Model & Competitive Edge

Castrol India is a leading player in automotive and industrial lubricants. Its strengths include

Strong brand equity and distribution network

B2B and B2C diversification

Innovation leadership (e.g., API SQ engine oils)

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Recent legal win worth ₹4,131 Cr boosts sentiment

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Its competitive moat lies in brand loyalty, technical innovation, and operational efficiency.

📊 Technical & Sentiment Indicators

RSI: 49.3 – Neutral zone, no strong momentum.

MACD: -2.29 – Bearish crossover, short-term weakness.

Volume Dip – Below weekly average, indicating reduced trading interest.

DMA 50 & 200: Current price is below both, suggesting mild bearishness.

💡 Investment Strategy

🔽 Entry Zone

Ideal Buy Range: ₹180–₹190, closer to support and below moving averages.

Current Price ₹203: Slightly above ideal entry, but not prohibitively expensive.

🕰️ Long-Term Holding

Hold if already invested: Strong fundamentals, high dividend yield, and minimal debt make it a solid long-term compounder.

Cautious entry for new investors: Wait for dips or consolidation near ₹190 for better margin of safety.

Let me know if you’d like a peer comparison or discounted cash flow model to refine the valuation further.

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