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