Gulf Oil Q4 Net Profit Jumps 40% YoY | NDTV Profit
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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.