Gulf Oil Lubricants Q3FY17 Concall Summary

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Key Performance Figures

Gulf Oil LUbricants Q3FY17 Financials
  • Company has declared an interim dividend of Rs 3.5 per share
  • Revenue from B2C is around 62% and 38% is form B2B
  • Overall revenue growth with institutional order was around 5.2%. PBT was around 4.7% and PAT growth was 5.4%. On YTD basis, PBT and PAT are at 26% growth. Overall volume growth YTD is 14% and without institutional order it is at 11%
  • Gross Margins have expanded by close to 1.2%. Company is debt free with net cash positive of close to rs80-85 Cr as of Dec 31 2016. ROCE is 67%, ROE 35% and working capital cycle continues to be in range of 90-100 days despite tough liquidity conditions
  • Segments that did well
    • Commercial vehicles space- both factory fill and dealerships grew well
    • OEM factory fills went up
    • Diesel Engine oils has shown a grew at 7-8%
    • Tractors space showed growth in double digits owing to tie up with Mahindra and company’s own focus on tractor segment
    • Motorcycle segment recovered in December after falling in November. Company’s tie up with Bajaj Auto gave it close to 1% volume growth. MCO segment grew at 4-5%

 New Initiatives

  • Company has continued its marketing activities and has put thrust across B2C and B2B
  • Company has launched new products like synthetic grades for passenger cars and it has g >100%. Synthetic grades contribute 10% to PMCO portfolio
  • Company has put in price increase in January in B2C segment of 2-3% and it will aid growth in coming quarters.

Effect of Demonetization

  • Motorcycle and car oil segments were impacted
  • These are low value items in the range of Rs 250-Rs 800. So people delayed their oil change as there was cash crunch
  • Liquidity is back in system and lot of retailers have started taking other mods of payment like Paytm.

Update on Volumes

Exact volumes for the quarter are 20,000 KL. There was no institutional order in Q3. Volumes in Q2 was 18500 KL not including institutional order. Including institutional order, it was 19400 L. Volume breakup

The company tries to grow volumes at 2-3x of industry. Volume growth in Q3 was 9% when industry growth wasn’t more than 2-3%

Segment wise Volume growth

Chennai Plant

  • Plant being commissioned with capacity close to 40,000 Kl to 50,000 KL
  • Close to Rs 60 Cr has been incurred so far
  • Progress on track. Production to start from Q3 FY 18
  • Will reduce pressure on Silvassa plant which is already working on over capacity. So, after Chennai plant starts, utilization of Silvassa plant will reduce slightly in the short run

Ad Spends

  • Ad spends close to 6% of revenue in Q3
  • Company tries to maintain 6-7% range for Ad spends

Other Expenditure

  • Has been Rs 70 Cr over past two quarters
  • Ad spends a significant part of other expenditure
  • OEM royalties also form part of other expenditure

Channel Update

  • Total retailer universe is of 175,000 outlets. Castrol is at 100k outlets. Gulf il is trying to get close to 75000 outlets
  • Apart from retail outlets the company also has branded workshops, Bike Stops for MCO and Car stops for Car oils

Clarification on OE Relationship

  • Bajaj tie up:
    • Company has tie up with Bajaj Dealership and also for after- market which is the Bazaar
    • During the warranty, the bikes go to the OEM dealership ad also after warranty a part of population continues to go to the OEM workshop as they have extended contracts or annual maintenance contracts
  •  Car segment
    • No new tie up with any Car OEM this year

Raw Material Cost

Base oil price has gone up by 7%to 8% in Q3 over Q2. Company has increased price of its product by 2-3%. Price hike is an industry wide phenomena. Other competitors have also either taken the increase or are in the process of taking it


  • EBITDA margins has been declining due to increase in raw material cost.
  • EBITDA margins expected to be in 15-16% in future
  • Steps taken by company to safeguard margins
    • Trying to gain market share in PCMO segment
    • Improved product mix- Gulf Oil is trying to improve B2C product mix by promoting semi synthetic and synthetics. Company is also looking at working for higher margin in B2C business
    • Company has taken a small price increase in B2C in November for selected grades and a rise of 2-3% in December
    • Company is also trying to improve volumes

Segments within B2B

  • OEMs
  • Infrastructure customers
  • Sales to Direct industry
  • Marine and other institutions like state transport undertaking etc

PCMO Business

PCMO growth for 9 months was close to 15% and Q3 was close to just 2% due to demonetization. Gulf branded PCMO grew at 22% YTD. Focus segment of synthetic PCMO or semi-synthetic PCMO has grown at 100%