Hold Galaxy Surfactants; target of Rs 2475: ICICI Securities

ICICI Securities' research report on Galaxy Surfactants

Galaxy Surfactants’ (GSL) Q1FY24 EBITDA/kg stood at INR 20.8, down 16.8% YoY. Volume growth was steady at 7.4%. India volume continues to be strong; AMET has stabilised at low levels, and RoW has been impacted by the de-stocking in North America. GSL has guided EBITDA/kg to grow at INR 20-22.75 in FY24. This will be driven by recovery in North America market which will likely drive higher sales for specialty care segment; AMET volumes should start growing on a low base. We believe EPS growth for FY24 looks challenging due to highly unfavourable base of FY23, which we anticipate to normalise; however, volume growth can be better than company guidance as AMET has stabilised. EPS growth will appear soft over FY23-25E on an unfavourable base.

Outlook

We have cut our EPS estimates by 6-7% for FY24-25E, but increased our target price to INR 2,475 (from INR 2,440), valuing GSL at a PE multiple of 24x FY25E EPS (earlier: 22x). Maintain HOLD.; support around 19300 held so far; avoid trading the index