Motilal Oswal's research report on Galaxy Surfactants
The price of Fatty Alcohol, a key raw material for GALSURF, surged 52% YoY in 4QFY22 (up 16% QoQ) due to supply-related issues. Freight rates have also increased 300-1,000% from the pre-pandemic levels, while lead time still remains high for supply of raw materials (at 2-3 weeks). The management has already guided for a normalization of margin to INR16-18/kg from a high of INR20.5/kg in 3QFY21. However, the current high raw material prices may cause a dent in GALSURF’s margins in the short-term. Nonetheless, despite the likely short-term pressure on margins, we maintain our BUY rating on the stock, given its: a) robust volume growth trajectory, and b) continued focus on expansion, especially in the specialty care products segment, which should underpin margin expansion.
Outlook
We value GALSURF at 40x FY24E EPS of INR91 to arrive at our TP of INR3, 632, implying 22% potential upside.
More Info
At 16:01 hrs Galaxy Surfactants Ltd. was quoting at Rs 2,951.00, down Rs 24.65, or 0.83 percent.
It has touched an intraday high of Rs 2,998.65 and an intraday low of Rs 2,951.00.
It was trading with volumes of 631 shares, compared to its thirty day average of 2,192 shares, a decrease of -71.21 percent.
In the previous trading session, the share closed up 1.24 percent or Rs 36.40 at Rs 2,975.65.
The share touched its 52-week high Rs 3,600.00 and 52-week low Rs 2,561.50 on 14 September, 2021 and 23 April, 2021, respectively.
Currently, it is trading 18.03 percent below its 52-week high and 15.21 percent above its 52-week low.
Market capitalisation stands at Rs 10,462.70 crore.
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