Target: ₹3,250
CMP: ₹2,756.50
Galaxy surfactants is well-positioned to capitalise on the growing demand for personal care and home care (HPC) products globally. Its relentless focus on expanding the high-margin specialty care product segment, currently fetching about 40 per cent of revenues, is expected to drive an EBITDA CAGR of about 14.3 per cent over FY24-27.
As regards the raw material volatility, Galaxy has the ability to pass on the hike to consumers with a lag, thereby normalising its margins annually. Galaxy’s capacity expansion of ₹150 crore, with utilisation projected to rise from 70 per cent to about 85 per cent over the next three years, ably supports 6-8 per cent volume CAGR. It is debt-free with free cash flow likely to touch ₹350 crore by FY27.
We are cautiously optimistic about H2FY25, expecting stabilisation and restocking in AMET with easing geopolitical and logistical challenges, alongside a gradual recovery in India driven by urban demand normalisation and improving rural dynamics. Galaxy clocked a ROCE of 15.7 per cent in FY24, which should expand by 182 bps in FY25 to 17.5 per cent and sustain over next two years.
We expect overall volumes to grow about 6.9 per cent annually over FY25e-27e, banking on an EBITDA/MT of ₹21,500-23,300 for FY25-27e. We initiate coverage with an Add rating at a target price of ₹3,250.
