Galaxy Surfactants Q3 Results Review - One-Offs And Red Sea Challenges Hurt Margins: Motilal Oswal

Motilal Oswal Report

Galaxy Surfactants Ltd. reported Ebitda/kilograms of Rs 17.8, down 33% YoY (our estimate of Rs 21.2). Galaxy Surfactants achieved a total volume growth of ~8% YoY to 63.3 tmt (our estimate of 62.9 tmt) with volume momentum sustaining in India and Africa Middle East and Turkey regions. Subsequently, Ebitda stood at Rs 1.1b (down 27% YoY), while profit after tax came in at Rs 714 million (down 33% YoY).

The quarterly volumes were adversely impacted by the Red Sea escalations, because of which some orders have shifted to Q4 FY24. Further escalations of the Red Sea issue remain one of the biggest threats as of now. Freight costs and lead times have gone higher than usual, which may in turn lead to slower-than expected recovery in North America.

The stock is currently trading at ~25 times FY25E earning per share of Rs 103.6 and ~16 times FY25E enterprise value/Ebitda. We value the company at 30 times December- 25E EPS to arrive at a target price of Rs 3,500. We reiterate our 'Buy' rating on the stock.

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