Chemicals

India I Equities Company Update

Change in Estimates Target Reco 

13 February 2023

Galaxy Surfactants
Rating: Buy
Healthy domestic demand with export recovery; upgrading to a Buy Target Price: Rs.3,000
Share Price: Rs.2,427
With supplies easing, good domestic demand and gradual demand
recovery in developed markets, we expect Galaxy to attain its future 6-
Key data GALSURF IN / GALX.BO
8% volume growth guidance. We are positive on its long-term growth, 52-week high / low Rs.3,448 / 2,302
backed by the promising domestic demand outlook, high-value-added- Sensex / Nifty 60432 / 17771
product launches and the more revenue from specialty chemical 3-m average volume $0.6m
products with rising consumption in developed markets. For the last six Market cap Rs.86bn / $1,041.4m
quarters, has been faced demand issues, which are expected to soften Shares outstanding 35m
in FY24. On the steep drop in the stock price, we upgrade our rating to
a Buy though with the same TP of Rs3,000 valuing it at 26x FY25e Shareholding pattern (%) Dec'22 Sep'22 Jun'22
earnings. Promoters 70.9 70.9 70.9
- of which, Pledged - - -
Mixed performance across markets. Shrunken demand in Europe and China Free float 29.1 29.1 29.1
for specialty products though strong growth domestically and recovery in - Foreign institutions 2.8 2.8 1.1
- Domestic institutions 12.7 12.7 14.6
AMET, mainly Egypt, bolstered Galaxy’s Q3 performance. Revenue grew - Public 13.6 13.5 13.4
16.3% y/y to Rs10.8bn (though q/q down 12.3%), mainly supported by 15.6%
y/y realisation growth. The q/q revenue fall was mainly due to lower realisations.
Supported by a better product mix, higher realisations, reduced freight rates and Estimates revision (%) FY23e FY24e FY25e

RM prices, EBITDA/ton shot up 101% y/y, 19% q/q, to Rs26,396. Further, Sales (2.1) (2.8) (2.7)
there was Rs200m one-off on export benefits from Egypt. EBITDA 12.8 9.4 8.4
EPS 17.2 10.6 9.3
Guidance. Galaxy is doing well in the domestic market, volumes at a 8% CAGR
in the past five years. Management expects the growth momentum to persist. It Relative price performance
is sanguine regarding improvement in the RoW as consumption is seen making 3,600
3,400
a good comeback in Europe and developed markets. Volumes in developed 3,200
markets declined in Q2 due to high channel stocks, which are now normal in 3,000
2,800
major markets, except the US. Turkey brings ~10% to sales and more clarity on 2,600
the impact would be seen in coming days. Management maintained its 6-8% 2,400
volume growth guidance, with higher EBITDA growth than volumes. 2,200
2,000
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Valuation. We upgrade our rating to a Buy with the same TP of Rs3,000, 26x
FY25e EPS. Risks: Lower prices of performance products, challenges in GALSURF Sensex

AMET and volatility in raw-material prices. Source: Bloomberg

Key financials (YE Mar) FY21 FY22 FY23e FY24e FY25e

Sales (Rs m) 27,841 36,857 45,128 41,019 44,197
Net profit (Rs m) 3,021 2,628 3,822 3,638 4,280
EPS (Rs) 85.2 74.1 107.8 102.6 120.7
P/E (x) 28.5 32.7 22.5 23.6 20.1
EV / EBITDA (x) 19.5 22.3 15.3 15.3 12.9
P/BV (x) 6.6 5.5 4.6 4.0 3.5
RoE (%) 23.2 16.7 20.5 16.9 17.3
RoCE (%) 20.2 15.0 18.5 15.9 17.4
Bhawana Israni
Research Analyst
Dividend yield (%) 0.7 0.7 1.1 0.8 1.2
Net debt / equity (x) 0.1 0.2 0.2 -0.1 -0.1
Source: Company, Anand Rathi Research

Anand Rathi Share and Stock Brokers Limited (hereinafter “ARSSBL”) is a full-service brokerage and equities-research firm and the views expressed therein are solely of
ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient. Disclosures and analyst
certifications are present in the Appendix.

Anand Rathi Research India Equities

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Quick Glance – Financials and Valuations

Fig 1 – Income statement (Rs m) Fig 2 – Balance sheet (Rs m)

Year-end: Mar FY21 FY22 FY23e FY24e FY25e Year-end: Mar FY21 FY22 FY23e FY24e FY25e
Net revenues 27,841 36,857 45,128 41,019 44,197 Share capital 355 355 355 355 355
Growth (%) 7.2 32.4 22.4 (9.1) 7.7 Net worth 13,014 15,744 18,610 21,540 24,750
Direct costs 17,746 25,885 31,590 28,713 30,717 Debt 2,893 4,207 4,207 1,707 1,207
SG&A 5,607 6,965 7,717 6,768 7,071 Minority interest - - - - -
EBITDA 4,488 4,007 5,822 5,538 6,409 DTL / (Assets) 227 210 210 210 210
EBITDA margins (%) 16.1 10.9 12.9 13.5 14.5 Capital employed 16,133 20,161 23,027 23,457 26,167
- Depreciation 740 711 820 911 993 Net tangible assets 7,036 7,522 9,041 9,946 10,603
Other income 109 125 68 123 133 Net intangible assets 57 54 54 54 54
Interest expenses 134 129 231 85 60 Goodwill 27 28 28 28 28
PBT 3,723 3,293 4,838 4,665 5,488 CWIP (tang. & intang.) 1,240 2,055 1,216 900 750
Effective tax rates (%) 18.8 20.2 21.0 22.0 22.0 Investments (strategic) - - - - -
+ Associates / (Minorities) Investments (financial) 435 5 5 5 5
Net income 3,021 2,628 3,822 3,638 4,280 Current assets (excl. cash) 10,581 15,592 18,728 16,202 17,016
Adjusted income 3,021 2,628 3,822 3,638 4,280 Cash 1,114 711 1,158 2,868 4,715
WANS 35 35 35 35 35 Current liabilities 4,355 5,806 7,202 6,547 7,003
FDEPS (Rs / sh) 85.2 74.1 107.8 102.6 120.7 Working capital 6,226 9,786 11,526 9,656 10,012
FDEPS growth (%) 31.1 (13.0) 45.4 (4.8) 17.6 Capital deployed 16,133 20,161 23,027 23,457 26,167
Gross margins (%) 36.3 29.8 30.0 30.0 30.5

Fig 3 – Cash-flow statement (Rs m) Fig 4 – Ratio analysis

Year-end: Mar FY21 FY22 FY23e FY24e FY25e Year-end: Mar FY21 FY22 FY23e FY24e FY25e
PBT (after OI and interest) 3,749 3,297 5,002 4,627 5,415 P/E (x) 28.5 32.7 22.5 23.6 20.1
+ Non-cash items 740 711 820 911 993 EV / EBITDA (x) 19.5 22.3 15.3 15.3 12.9
Oper. prof. before WC 4,488 4,007 5,822 5,538 6,409 EV / Sales (x) 3.1 2.4 2.0 2.1 1.9
- Incr. / (decr.) in WC 91 3,560 1,740 -1,870 356 P/B (x) 6.6 5.5 4.6 4.0 3.5
Others incl. taxes 711 686 1,016 1,026 1,207 RoE (%) 23.2 16.7 20.5 16.9 17.3
Operating cash-flow 3,686 (238) 3,066 6,381 4,845 RoCE (%) - after tax 20.2 15.0 18.5 15.9 17.4
- Capex (tang. + intang.) 960 2,011 1,500 1,500 1,500 RoIC (%) 21.3 15.8 19.4 17.5 20.6
Free cash-flow 2,727 (2,249) 1,566 4,881 3,345 DPS (Rs / sh) 18.0 18.0 27.0 20.0 30.2
Acquisitions Dividend yield (%) 0.7 0.7 1.1 0.8 1.2
- Div. (incl. buyback & taxes) 638 638 956 709 1,070 Dividend payout (%) - incl. DDT 21.1 24.3 25.0 19.5 25.0
+ Equity raised - - - - - Net debt / equity (x) 0.1 0.2 0.2 -0.1 -0.1
+ Debt raised (1,066) 1,314 - (2,500) (500) Receivables (days) 61 63 62 62 62
- Fin investments 377 (430) - - - Inventory (days) 88 100 94 83 79
- Misc. (CFI + CFF) (OI & int.) 77 (740) 164 (38) (72) Payables (days) 78 73 73 73 73
Net cash-flow 569 (403) 447 1,710 1,847 CFO : PAT% 122.0 (9.1) 80.2 175.4 113.2
Source: Company, Anand Rathi Research Source: Company, Anand Rathi Research

Fig 5 – Price movement Fig 6 – Q3 FY23 revenue break-up

(Rs)
4,000

3,500
Specialty Care
3,000
Products
37%
2,500

2,000

1,500

1,000 Performance
Surfactants
500 63%

0
Nov-18

Nov-19

Nov-20

Nov-21

Nov-22
May-20

May-21

May-22
Feb-18
May-18
Aug-18

Feb-19
May-19
Aug-19

Feb-20

Aug-20

Feb-21

Aug-21

Feb-22

Aug-22

Feb-23

Source: Bloomberg Source: Company

Anand Rathi Research 2

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Result highlights
Operating performance
Supply side improvement and greater domestic demand supported Galaxy’s
Q3 growth. However, Europe slowed down and headwinds in AMET
persisted. Demand in premium categories has risen that in the mass and
“masstige” categories was stable. Q3 revenue grew 16.3% y/y to Rs10.8bn,
though q/q down 12.3%. The y/y growth was mainly driven by realisations,
up 15.6% to Rs185,090 a ton, while volumes were flat at 58,364 tons.
Sequential revenue growth was chiefly hurt by 10.9% lower realisations, and
1.6% lower volumes.
The trend of softening RM prices continued in Q3. Fatty alcohol prices
declined 46% y/y, 7% q/q, to $1,393/ton ($2,602 the previous quarter,
$1,490 a year ago). The gross margin was 31.6%, up a huge 413bps y/y,
469bps q/q. The EBITDA margin ballooned 604bps y/y, 357bps q/q, to
14.3%, partially supported by better pricing and product mix, and exchange
gains. Absolute EBITDA was up 102% y/y, 17% q/q, to Rs1.5bn.
Blended EBITDA/ton was Rs26,396 (Rs13,165 a year ago, Rs22,214 the
quarter prior). The favorable base, higher other income and lower tax
expenses helped PAT rocket 133% y/y, 27% q/q, to Rs1.1bn despite higher
depreciation, finance costs and the tax rate.

Fig 7 – Quarterly trend - Blended performance

Particulars Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Y/Y % Q/Q 9M FY22 9M FY23 % Y/Y
Revenue (Rs m) 6,747 7,835 8,264 8,773 9,291 10,529 11,589 12,316 10,803 16.3 (12.3) 26,328 34,708 31.8
Volumes (tons) 58,238 63,007 59,865 58,814 58,027 57,511 55,272 59,283 58,364 0.6 (1.6) 176,706 172,919 (2.1)
Realisation / ton (Rs) 115,852 124,354 138,041 149,165 160,113 183,085 209,669 207,754 185,090 15.6 (10.9) 148,992 200,717 34.7
EBITDA (Rs m) 1,195 1,174 1,085 709 764 1,450 1,480 1,317 1,541 101.7 17.0 2,558 4,338 69.6
EBITDA / ton (Rs) 20,514 18,630 18,122 12,050 13,165 25,206 26,780 22,214 26,396 100.5 18.8 14,473 25,085 73.3
Source: Company

Performances, by division
Performance Surfactants

Performance surfactant sales were 39,156 tonnes, up 5.9% y/y, flat q/q,
supported by growth in India. Revenue grew 20% y/y to Rs6.8bn (though
q/q down 12%), driven by 13.2% y/y realisation growth to Rs174,430/ton
(q/q down 12.7%). The division accounted for 63% of revenue (61.2 % a
year ago, 63% the quarter prior).

Fig 8 – Quarterly trend – Performance Surfactants

Particulars Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Y/Y % Q/Q 9M FY22 9M FY23 % Y/Y
Revenue (Rs m) 4,010 4,960 5,160 5,590 5,700 6,110 7,000 7,770 6,830 19.8 (12.1) 16,450 21,600 31.3
% of sales 59.1 63.1 62.2 63.4 61.2 58.0 60.5 63.0 63.0 178 (1) 62.2 62.2 -6.4
Volumes (tonnes) 36,618 41,712 38,778 38,023 36,983 35,410 35,443 38,902 39,156 5.9 0.7 113,784 113,501 (0.2)
Realization / ton (Rs) 109,509 118,911 133,065 147,016 154,125 172,550 197,500 199,733 174,430 13.2 (12.7) 144,572 190,307 31.6
Source: Company

Anand Rathi Research 3

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Specialty-care products

The company’s specialty care portfolio deteriorated due to the energy crisis
in Europe and the slowdown. Its specialty-chemicals volumes declined 8.7%
y/y, 5.8% q/q, to 19,208 tonnes. The division’s revenue grew 11% y/y to
Rs4bn (though q/q down 12%), supported by higher realisations. In Q3, this
division brought 37% to revenue (38.8% the quarter prior, 37% a year ago).

Fig 9 – Quarterly trend - Specialty care

Particulars Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Y/Y % Q/Q 9M FY22 9M FY23 % Y/Y
Revenue (Rs m) 2,770 2,900 3,140 3,230 3,610 4,430 4,570 4,560 4,010 11.1 (12.1) 9,980 13,140 31.7
% of sales 40.9 36.9 37.8 36.6 38.8 42.0 39.5 37.0 37.0 (178) 1 37.8 37.8 6.4
Volumes (tonnes) 21620 21295 21087 20791 21044 22101 19829 20381 19208 (8.7) (5.8) 62,922 59,418 (5.6)
Realization / ton (Rs) 128,122 136,182 148,907 155,356 171,545 200,443 230,471 223,738 208,767 21.7 (6.7) 158,609 221,145 39.4
Source: Company

Fig 10 – Geographic growth

40%
32%
30% 27% 29%

20% 14% 13% 14% 12%

10% 11%
10% 9%
6% 6% 4%
3%4% 3% 3%
0%
0%
-2% -4%
-10% -6% -7% -6% -6%
-9%
-13%
-20% -17%
-21%
-30% -27% -29%
-40%
Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q4FY22

Q1FY23

Q2FY23

Q3FY23
India Africa Middle East Turkey Rest of the World

Source: Company

Anand Rathi Research 4

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Fig 11– Quarterly trend (Rs m)

Particulars Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Y/Y % Q/Q 9M FY22 9M FY23 % Y/Y
Income 6,747 7,835 8,264 8,773 9,291 10,529 11,589 12,316 10,803 16.3 (12.3) 26,328 34,708 31.8
RM costs 4,200 4,972 5,642 6,445 6,741 7,058 8,018 9,005 7,391 9.6 (17.9) 18,828 24,413 29.7
Employee expenses 491 589 542 478 516 583 619 627 600 16.3 (4.4) 1,535 1,846 20.2
Other expenses 861 1,100 995 1,142 1,271 1,439 1,472 1,368 1,271 0.1 (7.0) 3,407 4,111 20.7
EBITDA 1,195 1,174 1,085 709 764 1,450 1,480 1,317 1,541 101.7 17.0 2,558 4,338 69.6
Depreciation 169 240 168 181 177 184 189 205 216 21.5 5.3 527 610 15.7
Interest 24 30 29 37 28 34 44 56 56 96.1 (1.4) 94 156 64.9
Other income 30 26 45 50 18 12 (20) 11 37 112.5 246.3 113 28 (75.1)
PBT 1,032 930 933 541 576 1,244 1,227 1,067 1,307 127.0 22.5 2,050 3,600 75.7
Tax 180 143 164 122 120 260 223 228 245 104.7 7.4 406 696 71.6
Reported PAT 852 787 768 419 456 984 1,004 839 1,062 132.8 26.6 1,644 2,904 76.7
EPS (Rs) 24.0 22.2 21.7 11.8 12.9 27.8 28.3 23.7 30.0 132.8 26.6 46.4 81.9 76.7
Source: Company

Fig 12 – Quarterly trend, as percent of sales

Particulars % Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 bps Y/Y bps Q/Q 9M FY22 9M FY23 bps Y/Y
Gross margins 37.7 36.5 31.7 26.5 27.4 33.0 30.8 26.9 31.6 413 469 28.5 29.7 117
Employee costs 7.3 7.5 6.6 5.4 5.6 5.5 5.3 5.1 5.6 (0) 46 5.8 5.3 (51)
Other expenses 12.8 14.0 12.0 13.0 13.7 13.7 12.7 11.1 11.8 (191) 67 12.9 11.8 (110)
EBITDA margins 17.7 15.0 13.1 8.1 8.2 13.8 12.8 10.7 14.3 604 357 9.7 12.5 278
Depreciation 2.5 3.1 2.0 2.1 1.9 1.7 1.6 1.7 2.0 9 33 2.0 1.8 (24)
Interest 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.5 0.5 21 6 0.4 0.4 9
Other income 0.5 0.3 0.5 0.6 0.2 0.1 (0.2) 0.1 0.3 16 26 0.4 0.1 (35)
PBT margins 15.3 11.9 11.3 6.2 6.2 11.8 10.6 8.7 12.1 590 344 7.8 10.4 259
Effective tax rate 17.4 15.4 17.6 22.5 20.8 20.9 18.2 21.4 18.7 (204) (264) 19.8 19.3 (46)
PAT margins 12.6 10.0 9.3 4.8 4.9 9.3 8.7 6.8 9.8 492 302 6.2 8.4 212
Source: Company

Fig 13 – Revenue and growth trends Fig 14 – Share of revenue, by business category
(Rsm) (%) (%)
14,000 50 100.0
90.0
26.6

12,000 40
35.5

36.6
36.9

37.0
37.0
37.8
38.5

38.5

38.8

39.5
39.9

40.9
42.0

42.0

80.0
10,000 30 70.0
60.0
8,000 20
50.0
6,000 10 40.0
73.4
64.5

63.4
63.1

63.0
63.0
62.2
61.5

61.5

61.2

60.5
60.1

59.1
58.0

58.0

4,000 0 30.0
20.0
2,000 -10
10.0
0 -20 0.0
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23

Revenue y/y Growth q/q growth Performance Surfactants Specialty Care Products
Source: Company Source: Company

Anand Rathi Research 5

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Fig 15 – Realisation / ton and EBITDA / ton Fig 16 – Volume split

(Rs/ton) (Rs/ton) (tons)
220,000 28,000 66,000
205,000 26,000 58,000

21,295
21,600
190,000 24,000

21,087

20,381
19,208
19,277

20,791
21,044
21,620
50,000

21,148

22,101
175,000

19,829
19,295
20,996

15,496
22,000
160,000 42,000
20,000
145,000
18,000 34,000
130,000

41,712
41,426
16,000

39,156
38,902
38,853

38,778
38,023
36,983
26,000

36,618
36,397
35,919
115,000

35,443
35,410
34,978
33,771
100,000 14,000
18,000
85,000 12,000
70,000 10,000 10,000

Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Realization/ton EBITDA/ton Performance Surfactants Specialty Care Products
Source: Company Source: Company

Fig 17 – EBITDA and margin trends Fig 18 – PAT and growth trends
(Rsm) (%) (Rsm) (%)
1,800 18 1,200 150
1,600
16 1,000
1,400 100

1,200 14 800
50
1,000
12 600
800
0
600 10 400

400 -50
8 200
200
0 6 0 -100
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23

EBITDA EBITDA Margin PAT y/y Growth q/q growth

Source: Company Source: Company

Anand Rathi Research 6

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Conference Call Highlights

Operating highlights
 Management says consumption sentiment has been derailed by inflation
which expected to be better in coming quarters.
 Rising demand for premium categories aids growth. Demand for the
mass and “masstige” categories was stable.
 The gradual price hikes, altered product mix, benefit of RM sourcing and
export benefits helped to EBITDA/ton rising to over Rs25,000 in 9M
FY23, from the guided-to Rs16,000-18,000.
 Fatty alcohol prices have fallen ~65% in the last six months.
 Current capacity utilization ~60-67%
Capex
 The company expects this expansion to stand it in good stead for the
next five years in terms of addressing demand.
 Capex for coming years Rs1.5bn-2bn annually. Rs1.2bn capex in 9M
FY23.
Indian market
 Galaxy is doing well in the local market: an 8% volume CAGR over the
last five years. It sold ~ 69,000 tons in 2019, rising to 100,000 tons now.
 Management expects the growth momentum to continue as inflationary
pressures ease.
AMET
 Demand in AMET was a concern as volumes declined ~15% y/y in 9M
FY23 and 6% y/y in Q3. Sequentially, though, they rose 11%, supported
by more volumes from Egypt.
 Egypt, which makes up ~35% of AMET volumes, has been experiencing
the headwinds of currency depreciation, down-trading and demand cuts.
 The Egyptian currency depreciated ~100% y/y from Dec’21, declined
another 25% in the last one month. The company expects demand to
improve in coming quarters.
 Management expects demand to improve in FY24
RoW
 The RoW performance has been mixed. Revenue declined 9% and 6%
y/y in Q3 and 9M FY23 respectively. The Asia-Pacific markets have
been steady while Europe and US was hit by demand decelerating and
channel destocking. Europe is a huge market for mild, preservative and
specialty chemicals.
Long-term outlook
 Management expects the performance to improve significantly in FY24
based on consumption making a strong comeback in Europe and
developed markets.

Anand Rathi Research 7

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

 With easing inflation and improving global demand for premium

products, the company expects the next leg of growth for specialty
products in future.
 For the long term, the company has maintained its 6-8% volume growth
guidance, with higher EBITDA growth than volumes and a 22% RoC.

Anand Rathi Research 8

13 February 2023 Galaxy Surfactants – Healthy domestic demand with export recovery; upgrading to a Buy

Valuations
We like the company and its management, and are sanguine regarding its
future performance. On the sharp fall in the stock price, we upgrade our
rating to a Buy with the same TP of Rs3,000 valuing it at 26x FY25e earnings.
Margin movement and demand turnaround are the key monitorables in a
volatile market.

Fig 19 – Change in estimates

Old New Change (%)
(Rs m) FY23e FY24e FY25e FY23e FY24e FY25e FY23 FY24 FY25
Revenue 46,094 42,201 45,485 45,128 41,019 44,197 (2.1) (2.8) (2.7)
EBITDA 5,162 5,064 5,913 5,822 5,538 6,409 12.8 9.4 8.4
PAT 3,262 3,291 3,916 3,822 3,638 4,280 17.2 10.6 9.3
Source: Anand Rathi Research

Risks
 Delay in implementing capex or plant synchronisation or de-
bottlenecking
 Inability to capture opportunities in performance surfactants
 Inability to pass on fluctuations in raw-material prices
 Further slowdown in the FMCG sector.

Anand Rathi Research 9

Appendix
Analyst Certification
The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s)
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whatsoever on any recommendation that they have given in the Research Report.

Important Disclosures on subject companies

Rating and Target Price History (as of 13 February 2023)
TP Share
3,800
GALSURF Date Rating (Rs) Price (Rs)
3,300
12 1 4-Jun-18 Sell 1,170 1,376
10 11 13 2 14-Aug-18 Hold 1,170 1,227
2,800
3 31-May-19 Hold 1,260 1,190
4 20-Aug-19 Hold 1,380 1,301
2,300 5 5-Dec-19 Sell 1,380 1,421
6 6-Feb-20 Sell 1,600 1,601
8 9
1,800 6 7 2-Jul-20 Hold 1,625 1,535
7
1 5 8 14-Aug-20 Hold 2,000 1,815
3 4
1,300 9 12-Nov-20 Buy 2,500 1,834
10 10-Jun-21 Hold 3,260 3,072
2
800 11 23-May-22 Hold 3,200 2,895
12 10-Aug-22 Hold 3,500 3,209
Jul-21
Jul-18

Jul-19

Jul-20

Jul-22
Mar-18

Nov-18
Jan-19
Mar-19

Nov-19
Jan-20
Mar-20

Nov-20
Jan-21
Mar-21

Nov-21
Jan-22
Mar-22

Nov-22
Jan-23
May-18

Sep-18

May-19

Sep-19

May-20

Sep-20

May-21

Sep-21

May-22

Sep-22
13 11-Nov-22 Hold 3,000 2,840

Anand Rathi Ratings Definitions

Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described
in the Ratings Table below:
Ratings Guide (12 months)
Buy Hold Sell
Large Caps (>US$1bn) >15% 5-15% <5%
Mid/Small Caps (<US$1bn) >25% 5-25% <5%

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