Motilal Oswal's research report on Galaxy Surfactants
Galaxy Surfactants (GALSURF) reported EBITDA/kg of INR16.7 in 4QFY24, down 28% YoY (our estimate of INR22.5). The company achieved a total volume growth of ~5% YoY to 60.8tmt (our est. of 60.4tmt), with healthy volume growth in India and RoW regions. Subsequently, EBITDA stood at INR1b (down 24% YoY), while PAT came in at INR775m (down 14% YoY). The management has guided that lead times have increased due to the Red Sea crisis, but it has not affected the demand for its products. The total impact of volumes was 2.5ktpa. GALSURF expects a full revival in volumes in Jun’24. Demand is normalizing in the AMET market and the currency is also stabilizing in Egypt. Barring any further escalations in geopolitical issues, the management expects 6-8% volume growth going forward, with EBITDA growth utpacing volume growth and earnings growth exceeding EBITDA growth. Volumes are expected to tilt toward premium specialty products in FY25. EBITDA/kg guidance, including other income, is at INR20.5-21.5 for FY25.
Outlook
The stock is currently trading at ~22x FY26E EPS of INR115 and ~14x FY26E EV/EBITDA. We value the company at 30x FY26E EPS to arrive at a TP of INR3,450. We reiterate our BUY rating on the stock.
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