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Buy Galaxy Surfactants; target of Rs 3525: Motilal Oswal

Motilal Oswal is bullish on Galaxy Surfactants recommended buy rating on the stock with a target price of Rs 3525 in its research report dated May 18, 2022.

May 20, 2022 / 09:01 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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Motilal Oswal's research report on Galaxy Surfactants


GALSURF reported a beat on our 4QFY22 estimates, with EBITDA (INR/kg) at INR25.2 (98% higher than our estimate, +35% YoY) on inventory gains, new contract terms, and improvement in the product mix. Total volume was flat QoQ (-9% YoY) at 57.5tmt (v/s 58tmt in 3QFY22). The management said the growth trajectory in India has been scaling down every quarter, with the first signs of a cutback in demand being seen. It is confident that once prices of palm kernel oil normalize, demand in India will grow at 8-10%. Outbound logistical issues eased in 4QFY22, but have again become a challenge due to the China-induced lockdowns and the war between Russia and Ukraine. Robust performance in the US market was driven by expansion of its US facility just before the COVID-19 pandemic and was aided by a sharp expansion in margin in 4QFY22. The guidance for EBITDA/mt remains unchanged at INR16-18/kg in the medium term from current levels, with a bias towards the higher limit.



Outlook


We maintain our Buy rating with a TP of INR3,525 per share, implying a 31% potential upside.

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first published: May 20, 2022 09:01 pm
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