Double-digit volume growth to continue – Galaxy Surfactants

Update on the Indian Equity Market:

On Tuesday, the Indian equities snapped the six-day winning streak and Nifty 50 ended at 15,109 (-0.5%). Among the sectoral indices, FINANCIAL SERVICES 25/50 (+0.3%), FINANCIAL SERVICES (+0.3%), and BANK (+0.2%) ended the day with gains. MEDIA (-1.9%), AUTO (-1.4%), and PHARMA (-1.2%) led the losers. Among the stocks, SBILIFE (+4.0%), ASIANPAINT (+3.8%), and HDFCLIFE (+3.6%) led the gainers while M&M (-3.0%), TATAMOTORS (-3.0%), and JSWSTEEL (-2.2%) dragged the index lower.

Excerpts of an interview with Mr. U Shekhar, Founder Promoter and Managing Director, Galaxy Surfactants (GALAXY) with CNBC TV18 on 9^th February 2021:

• GALAXY saw good 3QFY21 earnings. The reported double-digit volume growth on a YoY basis is expected to continue, especially in the specialty chemicals segment.
• Money received from Egypt which was accounted in 3Q was export benefits accumulated over the last 2-3 years. GALAXY accounts for the export benefits availed only when received.
• Consumer focus on personal hygiene has increased significantly this year. This is expected to sustain going forward and the new products which have been introduced are seeing slow evolution which is certainly giving Galaxy better numbers.
• The company has implemented expansion projects at Jhagadia, which was expected to be completed by April-21. This project has been delayed a little due to difficulties faced due to the outbreak of Covid-19.
• The disruption due to shipping and containers is continuing which is certainly putting pressure on the supply chain.
• The price hikes have been passed on to customers or absorbed the freight hikes in case of long-term contracts.
• As far as the margin is concerned, there will be a gradual progression when new products keep on getting better.

Consensus Estimate: (Source: market screener website)

• The closing price of GALAXY was ₹ 2,222/- as of 09-February-2021. It traded at 31x/ 27x/ 23x the consensus earnings estimate of ₹ 71.6/ 83.8/ 95.7 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 2,160 implies a PE multiple of 23x on FY23E EPS of ₹ 95.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”