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Gulf Oil Q4 Net Profit Jumps 40% YoY | NDTV Profit
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5/22/2024
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00:00
Hello and welcome back to NDTV Profit. You are watching Earnings Edge and I am your host
00:10
Mihika Barve. Now, the first company that we do have in focus today is Gulf Oil Lubricants.
00:14
Now, this stock has been buzzing in trade after posting a strong set of Q4 numbers and
00:19
the highlight was the net profit which is up 40% year on year at 87 crores. Now, to
00:26
put the numbers and the going forward outlook and perspective, we are joined by Manish Gangwal
00:30
who is the Chief Financial Officer at Gulf Oil Lubricants. Good afternoon Mr. Gangwal.
00:35
Good afternoon. Yes. First, I would just want to ask you on
00:39
your perspective on how the quarter went by. Give us some color.
00:42
Yes. So, as you mentioned, it was a fantastic quarter for us in terms of all top line growth
00:49
and profit growth, EBITDA growth and we have seen a complete good demand pickup in the
00:57
lubricant space. Market is back on track with lot of demand coming from all sectors including
01:05
infrastructure, mining, every segment has done well. So, overall, all around demand
01:13
conditions are improving and robust and of course, margin wise it was a very stable quarter
01:19
with the margins, EBITDA margins tracking at 13.5% and overall that resulted into a
01:27
pat growth of 37% for the quarter and even for the full year it is a 33% growth. So,
01:33
overall, good quarter, good year also on a whole. Highest ever revenues, EBITDA and profits
01:39
for us ever for the full year as well. Yes. Mr. Gangwal, my first question to you
01:43
would be what were the total volumes for the quarter and what's the outlook going forward?
01:48
So, on the core lubricant side, we have delivered 37,000 KL volume. Again, that's the highest
01:54
number we have done in a quarter. Of course, same to the similar to last quarter and then
02:00
we have a category called AdBlue which is a urea solution product for BS6 vehicles that
02:05
has also done well in this quarter again and that's another 37,000 KL volume. So, both
02:11
put together, we have done nearly 74,000 KL volume in the quarter and we believe that
02:17
the core lubricant sector will continue to grow at 2 to 3% nearly, of course, of 3% now
02:24
that the demand conditions are improving and at the same time, we have the trajectory and
02:29
our internal targets of growing 2 to 3 as the market. So, we continue our efforts to
02:36
deliver 2 to 3 as industry growth and we have been always doing for last 10 years, if you
02:40
see our track record. So, we are looking at good volume growth as well as revenue growth
02:47
and profit consequentiality. So, in numbers, does that translate into a
02:52
signal digit or a load double digit volume growth you're on your fiscal 25?
02:58
So, our objective would always be to reach near to the double digit, depends on the industry.
03:05
If the industry grows at let's say 4%, we obviously try to do double digit volume growth
03:09
or if the industry grows at 2 to 3%, then it will be high signal digit. But the revenue
03:15
growth is definitely double digit is what we are targeting. So, there is a value component
03:18
because we are premiumizing our products and there is a lot of focus now in each vertical
03:25
to have more of premium products in their category, especially in the automotive segment.
03:33
We have launched many new products which are towards the top end as well as towards the
03:39
value range. So, we are launching new products continuously and in car segment, we have launched
03:45
new SUV products because as we know 50% of the sale now of new car is SUVs. So, we are
03:51
going segment by segment and trying to premiumize our product as well. So, confident of a double
03:56
digit revenue growth. Got it. Now EBITDA margins of 13.49% and this is at the higher end of
04:02
the guided 12 to 14% range. When does the company expect to maybe hit across the 14%
04:08
range? Would it be this fiscal and are you all maintaining the same EBITDA guidance?
04:13
You see our endeavor is always to move to the higher end. That's the endeavor because
04:18
as I mentioned our focus on premium products continues but we want to continue our volume
04:24
growth trajectory as well. So, depending on the tailwind and the margin stability because
04:29
crude is a very volatile commodity and there are geopolitical situations but we follow
04:36
the margin management strategy and definitely the aim is always to move to the higher band.
04:40
Now it's only a matter of time and that is very difficult to tell at this stage but we
04:45
would definitely like to exit next year in the next band of 14 to 16%.
04:49
Yes, okay. So, 14 to 15% in the next financial year. But now given the company's focus on
04:57
premium products I want to understand how much currently do the premium products contribute
05:01
to total revenues and does the company have a set target going forward?
05:05
So, basically in each segment we have got premium products especially in the automotive
05:11
segment. We don't have a particular target as such but the internal focus and the entire
05:16
guidance to the sales team across different verticals is to focus more on the premium
05:21
products and that's giving us good results. A lot of our programs are linked to pushing
05:28
premium products to the next level.
05:31
Okay, but could you say maybe like around 15 to 20% of any segment, 15 to 20% should
05:39
come from premium products for any segment that you all don't have premium products in?
05:42
So, we want to actually grow, we have a growth target that our premium products should grow
05:47
at least twice of what our overall growth is. So, that is what we are aiming at without
05:52
having a product mix percentage. So, in each category we have our different targets of
05:57
growing the premium products.
05:58
Okay, and what is the current B2B versus B2C sub-segment, the wise breakup in terms of
06:05
your revenue mix?
06:07
So, every quarter close to 55% is B2C for us and 45% is B2B and this quarter was also
06:15
similar 55%, 45%.
06:17
And is that a mix that the company is happy with or do you all expect a shift?
06:21
No, so our focus continues to grow both the segments equally and obviously in B2C there
06:29
is an OEM franchisee workshop business also. So, that is doing well for us except the OEM
06:34
factory filled business, all the segments have done well for us and so that is why our
06:40
aim is to grow both the segments B2B and B2C both. B2B we have a lower market share, so
06:48
obviously our efforts are to grow that more.
06:50
Okay, my next question is during the passenger car segment, the company stated that they
06:56
do see that as a growth driver, especially in the SUV market given the new products launched
07:01
in Q3. What is the current share of the passenger car segment or this auto segment in terms
07:07
of revenues and what is the outlook on the segment looking ahead?
07:10
So, overall while we have a good market share across automotive products, in passenger
07:17
car we have a slightly lower market share and that is where our aim has been to launch
07:22
new products to complete the portfolio and then work with the channel partners to grow
07:29
that segment more, work with OEMs and we have recently entered into an OEM tie-up with Kia
07:36
which is a growing passenger car OEM. So, like that our focus is to continue to increase
07:44
our market share in passenger car, we have slightly around only 4% market share as of
07:50
now while our overall market share is close to 6-7%.
07:52
Got it. And in terms of the motorcycle and diesel engine segments, what is the current
07:57
market share that the company is enjoying? So, overall in both the categories we have
08:02
close to 8-9% market share and that is quite healthy and we continue to focus on these
08:07
two categories. In fact, both these categories have done well and partially also they are
08:12
linked to the rural economy and we have seen that rural is coming back. In the last quarter
08:17
we have seen that the rural for us also the growth from rural has been very good and motorcycle
08:23
you know is a very, has a large demand in rural. So, overall our focus on motorcycle,
08:29
oil and commercial vehicle also is equally high and we have done well in both the categories.
08:34
I want to ask you in terms of new product launches,
08:38
does the company have any in the pipeline for fiscal 2025?
08:41
So, as I mentioned we have just launched SUV products, specifically focused for SUVs plus
08:46
in the tractor segment we have launched new products. We are the pioneer in long-range
08:51
in commercial vehicle as well as tractor oil. So, first 1000 hour product in tractor segment
08:57
was launched by Gulf. So, our focus is to grow these categories and in motorcycle range and
09:03
all we have launched some of the value range products as well as the market demand is there
09:07
for them. Got it. My next question is on the outlook of exports. Now, historical contributions
09:13
suggest around a 5% to revenues. What's the demand outlook in terms of exports? Are there
09:21
any segments that the company is seeing higher growth in terms of demand from the export segment?
09:27
So, we have grown our export to now 25 countries plus and there has been a double digit growth in
09:33
exports in the last quarter. Overall, we export our Gulf branded products to the neighboring
09:40
countries but at the same time we are now tying up with Indian OEMs whose automobile are globally
09:47
being exported and on the back of this OEM tie-up we are increasing our export portfolio and for
09:54
some of the two-wheeler OEMs we are sending their co-branded products or their genuine oil products
10:00
to more than 20 countries. So, the export remains our focus in terms of tying up with Indian OEMs
10:06
and going abroad with them. Got it. And you know, is there a certain target that the company expects
10:12
in terms of percentage of revenue mix that they want to grow the exports or they see exports
10:17
growing at in the next two to three years? No. So, India is not a very, you know,
10:22
India is a food import country largely. So, and we have, Gulf as a brand has a global presence
10:29
across various countries. We have 20, our parent has 20 blending plants. So, we focus more on our
10:36
OEM products and we want to grow the segment in line with our OEM growth plans. Yeah. Also,
10:43
sir, you mentioned OEM tie-ups, you know, which made me remember a point now in the Q4 highlights,
10:48
there were weaker growth in the OEM factory fill which led to lower off-take. Could you maybe give
10:53
us more perspective on what the challenges were? So, OEM factory fill is the first fill when the
10:59
vehicle leaves the factory and that's where they use the lubricant and it is linked to the OEM
11:04
production plans. If the OEM cuts their production plan, then our factory fill, you know, off-take
11:10
goes down and that's what happened in Q4 and continuing from Q3 actually. Some of the OEMs
11:17
which are mainly commercial vehicle OEMs for us and they have cut down on their production to some
11:23
extent in the last two quarters and hence our factory fill volumes were in the negative territory.
11:29
If that was not there, we could have grown our volumes even higher. So, overall, it is linked
11:34
to the OEM production plan. And has there been certain recovery in the demand and in the
11:41
production of these OEMs? Like, would we expect better off-take in the next two quarters? So,
11:47
actually, the operating month has been healthy is what we can say and so definitely we hope that
11:54
once the, you know, the elections are over, the demand picks up and the production also
11:59
picks up for them and then for us the demand comes back. Got it. And Mr. Gangwara, my next
12:05
question is on the CAPEX incurred in FY24. What was the total CAPEX incurred and what's the
12:10
guidance for FY25 and how would this be allocated? So, usually we have 20 to 25 crore of CAPEX in
12:18
our normal lubricant business and we did nearly around that 25-26 crore this year also, last year.
12:24
And our aim is to continue to be in that range because we have enough blending capacity. What
12:30
we have to keep adding is some filling lines and some storage capacity, etc. So, 20-25 crore is
12:35
our CAPEX guidance for the current year as well. Got it. And my last question would be where does
12:40
current capacity stand and does the company plan to increase this capacity in FY25?
12:45
So, as I mentioned, we have sufficient blending capacity and we keep augmenting our filling
12:51
capacity and overall we generate a lot of cash. So, in the last year as well we have seen our
12:57
cash flows, we have generated close to 348 crore of cash from operations. So, overall we have
13:03
sufficient cash. If we need to augment some more capacity, we will be happy to do that.
13:07
Yes. Thank you so much, Mr. Gangwara, for joining us and we wish you all the best for the future.
13:12
Thank you. Well, viewers, that was Gulf Oil Lubricants Management for you,
13:19
giving us a perspective on what lies ahead for the company in terms of growth as well as
13:23
volume offtake. But on that note, it's time to slip into a short break,
13:29
but do stay tuned. We have lots more lined up on the other side.
Recommended
10:47
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