Gulf Oil Corporation Ltd: Buy For Steady Returns

Gulf Oil Corporation Ltd (GOCL) is a part of the renowned Hinduja Group, India's premier transnational conglomerate. Hinduja Group is a major  player in Automotive Manufacturing, Banking, Financial Services, Information Technology, Medi & Communication, Banking, Financial Services, Trading, Oil and Power. The Gulf brand is over 110 years old and is one of the world's leading lubricants brands. Gulf products area solf over in over 100 countries worldwide (outside USA) and cover a wide range of applications; across automotive, agricultural, industrial, construction and marine segments.

The company through a step down subsidiary structure in the UK and the USA has compledted acquisition of 100% stake in Houghton International Inc for USD 1.0 4 5 Billion, after a satisfactory conclusion of regulatory approvals. The acquisition which makes Gulf the world's 9 th largest lubricant company, fits extremely well with Gulf's existing Lubricant portfolio and makes it a full range Lubricants company servicing customers from Automotive, Metal Working to Energy, Aerospace and Marine. Houghton  has a very strong industrial portfolio which perfectly complements Gulf's very strong presence in the Automotive Lubricant sector.

GOCL will operate Houghton as a separate company and the rest of the Gulf's operations will be able to leverage Houghton's extensive base of industrial customers to offer them a complete end-to-end range of lubricants. Similarly, Houghton will be able to leverage Gulf's existing global manufacturing, strategic sourcing and distribution.

The acquistion through the step down subsidiary ensures that the financials of GOCL will not be affected. The debt will be serviced through  Houghton International Inc's cash flows. 

Founded in 1865, Houghton is the most recognized brand in Metal Working Fluids (MWF), especially in the North America and European markets. Houghton possesses the industry's broadest offering in the MWF segment and related speciality chemicals. It  has an extensive library of  high performance, proprietary chemcial formulations, which are  highly technical and are customized to meet the specific segments' needs. With a scale and a global market position nearly double that of its nearest competitors; Houghton holds the #1 position in both North America and Europe and the #2 position in the fast growing Asian market. Houghton acquired D A Stuart Holding GmbH in 2008 and this was followed by its acquisition of Shell's MEF business in 2011, to further strengthen its position in the USD 7 billion global market. It is to be noted that Houghton has delivered consistent growth and an improved returns over the  years.

Buy the scrip for the Medium Term for a target of Rs.110. For the short term it can be bought at Rs.85, for a short term target of Rs.91, with a SL of Rs.82 (EXIT). When the crude oil prices are not rising and RBI is going for a rate cut in the next month, it is better to focus on good auto ancilliary counters and GOCL is one of best. It has other stories too which will be disclosed later. Chartically, speaking, it has given a break out after a long consolidation. Moreover the current price is above its 200 DEMA price of Rs. 84.25. Its 100 DEMA is placed at Rs.86.05 and 50 DEMA at Rs.85.30. Please try to buy near the price mentioned in this report.
Note: This report was sent to the Paid Group members on 25th December, 2012.  Today, I saw the stock  being recommended by the Hindu Businessline. Join the Paid Service and be ahead of others.