Galaxy Surfactants - FY25E Volumes To Moderate, Margins To Improve: ICICI Securities

ICICI Securities Report

In the last three years, Galaxy Surfactants Ltd. has grappled with a variety of challenges, yet delivered consistent earnings thanks to its robust business model and diversified portfolio.

After a strong FY24E (+9.2%), we envisage Galaxy’s volumes slowing as India growth moderates while Africa, Middle East and Turkey improves. However, the company may revise its Ebitda/kg guidance upwards by at least Rs 1 in FY25E, as developed markets resume gaining traction.

Galaxy Surfactants will likely achieve its growth guidance with net profit more than Ebitda more than volume – stressed upon greatly by the company.

We cut our FY25E earnings per share by 3.8% on lower volumes estimates for India, and target price to Rs 2,440 (earlier: Rs 2,645), as we roll over our valuations to FY26E, and lower the multiple to 22 times (from 25 times). We upgrade our rating to Hold (from Reduce).

Risks Upside risks:

1. Restocking driving higher-than-expected volumes from developed market.

2. AMET volumes growing faster-than-expected.

3. India volumes growth sustaining at higher levels similar to past three years compound annual growth rate.

Downside risks:

1. Ebitda margin expansion lower-than-expected.

2. India volume deceleration higher-than-expected.

3. AMET market continues to remain challenging.

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