Galaxy Surfactants Q4 Results Review - Subdued Demand In Developed Markets Led To Miss: Motilal Oswal

Galaxy Surfactants Q4 Results Review - Subdued Demand In Developed Markets Results In Earnings Miss: Motilal Oswal

A technician tests a chemical solution in a lab. (Photo: freepik)

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

  • Galaxy Surfactants (GALSURF) reported an EBITDA/kg of INR23.2 (our estimate at INR24.8; down 8% YoY). This was led by a contraction in the Specialty volumes due to slowdown in developed markets. Total volumes were flat YoY at 57.9tmt (v/s 57.5tmt in 4QFY22), mainly because of a decline in volumes in the AMET and RoW regions (at ~-3% and ~-16% YoY, respectively).

  • Management highlighted that India volumes remained resilient (+14.6% YoY) with improved demand for premium categories that aided growth. Performance Surfactants also made a strong comeback during the quarter (+12% YoY volume growth). Rural demand recovery and an entry of a new player in the FMCG industry should drive the domestic market demand.

  • The US demand in 4QFY23 has been hit due to de-stocking by the customers and management expects demand to improve from 2QFY24. In 4QFY23, AMET region grew 7% YoY (ex-Egypt) in volumes with Egypt volumes starting to normalize currently. Management’s volume growth guidance remains at 6-8%; domestic volume growth is pegged at 8-10% with EBITDA growing faster than the volumes.

  • Fatty alcohol price declined 51% YoY to USD1,403/mt (up 1% QoQ) in 4QFY23. Realization dropped to INR168.4/kg (-9% QoQ) with gross margin at INR54.6/kg (-7% QoQ). We estimate EBITDA/kg to be at INR20 and INR22 for FY24 and FY25, respectively. That being said, we have not revised our estimates materially for FY24 and FY25 as of now, keeping in mind that there is still some time for the company to effect a complete volume recovery.

  • The stock is currently trading at 23x FY25E EPS and 14.5x FY25E EV/EBITDA. We value the company at 30x FY25E EPS of INR111.5, to arrive at our TP of INR3,345. We reiterate our BUY rating with a potential upside of 33%

Click on the attachment to read the full report:

Galaxy Surfactants_Q4FY23_Motilal Oswal.pdf
Read Document

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner

lock-gif
To continue reading this story
Subscribe to unlock & enjoy your
Subscriber-Only benefits
Still Not convinced?  Know More
Watch LIVE TV, Get Stock Market Updates, Top Business, IPO and Latest News on NDTV Profit.
GET REGULAR UPDATES