I was recently looking at an interesting company - Tide Water Oil Ltd (TWOL). The major product brands of TWOL are âVeedolâ and âNippon Mitsubishiâ.The product range includes automotive lubricants (engine oils, gear oils, transmission oils), industrial lubricants (hydraulic oils, superclean hydraulic oils, gear oils, specialty lubricants) and automotive and industrial greases.
It has also invested in wind power (which a lot of companies have doneprimarilyfor tax benefits) but the revenues (2 cr) isnegligiblein the overall scheme of things.
What is interesting is that this year the company aquired Veedol International Ltd from BP plc and has gained access to the Veedol brand in over 120 countries of the world.The company has established a subsidiary in Dubai, Veedol International DMCC, to cater to Middle East and North Africa.
Now some numbers:-
P&L Statement
FY12
FY11
FY10
FY9
FY8
FY7
Sales
1004.47
861.42
751.58
610.48
504.83
420.58
Other Income
1.98
4.72
3.51
0.05
4.35
2.39
Op Profit
75.65
99.06
91.66
47.7
35.97
15.8
EBDIT
75.65
103.78
95.17
47.75
40.32
18.19
Interest
1.1
1.89
1.93
3.1
2.59
3.52
Depreciation
9.26
9.71
6.18
3.39
2.5
1.76
PBT
86.13
92.18
87.06
41.26
35.23
12.91
Tax
27.11
30.3
31.54
18.23
12.14
3.98
PAT
57.92
64.16
57.79
27.55
23.18
8.97
EPS
664.86
736.46
663.34
316.23
266.04
102.96
Num of shares
871,200
871,200
871,200
871,200
871,200
871,200
Dividend per share
120
60
50
30
20
15
Dividend Yield
1.78%
0.89%
0.74%
0.45%
0.30%
0.22%
Dupont Analysis
OPM(%)
7.53%
11.50%
12.20%
7.81%
7.13%
3.76%
NPM(%) -- (A)
5.77%
7.45%
7.69%
4.51%
4.59%
2.13%
Asset turnover(avg) -- (B)
2.16
3.29
3.69
3.96
3.81
3.51
RoA(%)
12.45%
24.53%
28.38%
17.88%
17.48%
7.48%
Financial Leverage -- ( C)
1.51
1.00
1.00
1.02
1.05
1.13
RoE(%) -- (=A*B*C)
18.85%
24.53%
28.38%
18.24%
18.30%
8.49%
Key Risks:
A lot depends on crude prices.
The company is owned by Andrew Yule (a PSU),United India Insurance Company Limited and Life Insurance Corporation of India, so there is possibly some amount of government control or "inefficiency" built in.
Valuation:-
It trades at a PE of roughly 10 times earnings and 1.9 times Price/Book. It has been a regular dividend payer and is likely to continue to do so. Also, the company is available at a much cheaper valuation as compared to its peer - Castrol, although it is much smaller in size.
Catalyst for Valuation Trigger
The Dept of Divestment, Ministry of Finance, is planning to sell Andrew Yule's, United Insurance's and LIC's stake in TWOL to a strategic investor.
If the sale goes through, and we don't see any push back from political front (read Mamata Banerjee, as this is a Calcutta headquartered company), then this can act as a trigger for the stock price.
Would be very interesting to know Hitesh Patel’s view on this stock… Hope he will notice this thread and provide his valuable input to help us understand the investment theme…
As always much appreciated valued research by forum members…
The performance of the company had peaked in FY2011. After that the performance has deteriorated. Though revenues have increased, there is fall in profitability with almost stagnant EPS.
Over the long term the stock performance is in line with that of Castrol, though over short term it is more volatile.
What is the case for tide water over market leader Castrol?
i think you need to look at it from other angles as well apart from the moat or slack quarters… i am inclined to compare it with hind lever for drawing simile’s
there is a deafening noise achhaey din aaney waaley hain … who knows the disinvestment kicks in this time and i sincerely hope that it needs to shed weight by way of bonus and splits to make it more tradeable with more public participation.
Government is pushing for electric vehicles and has also increased registration fee for gasoline vehicles.So the usages of traditional gasoline engines will decrease.And I read that electric vehicles don’t use engine oil as lubricants compared to ICE.So in that scenario what will be the future for oil lubricant companies such as Tide Water Oil company.Please advise.
1->Growth from last 3 years seems kind of stagnant.Even the sales figure of Castrol are stagnant,then why Gulf Oil lubricants sales are increasing so rapidly?
2->What will be the impact of overall industry in-terms of BS6 engine introduction.
There are many positive points like
1->Dividend is good that is 140 per share.
2->Consolidated net profit has increased to 122 crore which has lead to increase in ROE. ROE will jump to almost 17% from 13% last year.
3->Cash flows from operating activities has jumped to 132.83 from 79.25 earlier.(fig in crores)
Will be glad if negatives points and other positive points are pointed out by fellow VPs.
Crude prices have been extremely volatile, how this will affect the functioning of the company depends on the stock that have and the price at which they have purchased or will have to purchase.
Major lubricant makers are now indulging in collabrations with automakers to sell their lubricants even through garages. Even Savsol has done this recently. Veedol is lacking in this department.
3.The interesting point in the results declaration is the point no 5. Company approved adoption of a new line of business. No details given yet.
Annual Report is out and details of the new business line along with it also.
So the new business lines are
1-> selling of sanitizer, personal protection equipments (ppe).The reason is As per management -This area is deemed to be new and having lot of potential for growth
2-> selling of car care products.The reason is As per management -This is deemed
to be advantageous as products manufactured primarily within the group can be marketed through the Company’s own distribution channels
Hi Guys, just wanted to bring this stock up for discussion again given the stellar run of 133% over last 15 days. Stock has jumped on news of board considering bonus as well as stock split in meeting on June 10th.
So just wanted to ask the investors on the forum who are well versed with this stock if it is still a good investment opportunity despite the gravity defying run (even today it closed at 10% upper circuit). My thesis is just that stocks often get back to the pre-bonus/split highs in short-to-mid term. Similar movement had unfolded in 2016 on news of bonus issue after which the stock did correct rapidly but gradually recovered over 2 years.
Mumbai based Standard Greases, a major supplier to Veedol and large player in greases in Asia, has picked up ~30% stake in Veedol until 2016 but has not been able to acquire a controlling stake since then. Standard has now become co-promoters with board seats and seems willing to acquire the entire company. However, Andrew Yule which is GOI owned owner has remained silent and seems unwilling to give up its ownership so easily.
Let’s assume that Standard was able to take complete control of Veedol and improve its margin profile to match with Gulf. That makes Veedol an attractive acquisition candidate.
I had penned this down two months back. This can explain a part of the move but not the extent of this giant move.
Tide Water Oil - no M&A event or any such with the 4Q results. Share split (2:5) + 1:1 bonus issue announced. This will increase the share count 5x. It seems the intention was to make this into a <Rs1000 per share stock versus Rs4500 it was at pre the rally. Dividend declared is Rs200 per share versus Rs240 last year - so no major +ve surprise there either.
For stock with low free float I can understand such drastic price actions but here 22% is public holding, the question then arises, “who is selling” and more important “Why?”.
At current price the buyers are at cool 3x returns (from base price of 5k 3 weeks ago) post the splits and dividend adjustments which is to be in last week of July 2021. Unless it corrects now in coming days drastically the sellers are at a huge loss.
Also worth noting is that last 3 weeks it was in continuous upper circuits so it seems it was well rigged.
Can any forum seniors add shed some light here as to the different scenarios that may pan out in such extreme cases.
