Motilal Oswal's research report on Galaxy Surfactants
GALSURF reported an EBITDA/kg of INR22.2 (est. INR20.8, up 84% YoY). Supply chain disruptions have reduced, with a significant decline in freight rates and raw material prices. Total volumes were flat QoQ at 59.3tmt (v/s 55.3tmt in 1QFY23). The muted volumes were on account of inflationary pressures in the AMET region, while the slowdown in Europe impacted Specialty Care volumes in 2QFY23. The management said demand in India remains robust. GALSURF is close to surpassing domestic sales volumes of 100tmta. The structural uptick that was seen during the COVID-led lockdown period has sustained, with the company expecting to grow its domestic business further.
Outlook
A continued focus on R&D (with an annual expenditure of INR400-500m) and increased wallet share from existing customers is likely to drive volume growth and expand EBITDA margin. Volume grew by ~6% CAGR over the last five years. We build in a similar growth over FY22-24 as well. We maintain our Buy rating with a TP of INR3,390.
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