Galaxy Surfactants Ltd. share price target

We reiterate our BUY rating on the stock with a TP of Rs 1,872 (22x Dec-21E) given, (1) Diversified portfolio that continues to attract and retain customers, (2) Presence in widespread geographies that diversifies business risk, (3) Stability of margins (standard deviation of EBITDA margins over FY10-19 at 2.0), and (4) Ability to generate ~20% RoCE. We visited the Taloja facility of Galaxy Surfactants (GSL) which was followed by an interaction with Mr. K. Natarajan, the Executive Director and COO as well Mr. Ganesh Kamath, the companys CFO. Following are the key takeaways from the event:

We remain constructive on the company given its diversified portfolio, healthy volume growth (9-10% over FY20-22E) and quality of customers. Robustness of its business enables GSL to maintain stable margins (EBITDAM of ~12.5 expected over FY20-22E). Given the secular growth opportunity and its capability to generate 20%+ returns on reinvested profits, GSL's current PER of 19.8/17.3x FY21/22E is rather low. We value GSL at 22x Sep-21 EPS to arrive at a TP of Rs 1,834. Maintain BUY. Galaxy Surfactants (GSL) 2QFY20 performance was commendable with >10% YoY volume growth amidst slowdown in the global Home and Personal care (HPC) market. GSL maintained a cautious domestic demand outlook for 2HFY20 but a gradual shift in consumption pattern towards specialty care products will help maintain profitability in the long run. Other geographies, however, will continue to support volume growth in 2H.

Currently, the stock is flat (vs. the Nifty FMCG Index that has delivered +16% since then) despite the 29.1/24.3% jump in EBITDA/PAT. Given the secular growth opportunity and its capability to generate 20%+ returns on reinvested profits, GSL's current PER of 19.0/16.6x FY21/22E looks contextually low Galaxy Surfactants (GSL) is a preferred global supplier of surfactants and other specialty chemicals to leading FMCG MNCs, and caters exclusively to their home and personal care (HPC) segment. Long and intimate relations with its customers drive GSLs steady volume growth, steady margins. It has a diversified portfolio of 200+ products selling across 80 countries to 1,700+ customers. Backed by an experienced management, GSL went public in Feb-18 at Rs 1,480/sh.

The market for personal and home care products in India is expected to grow at 7.9% and 7.2% CAGR by 2024. Further, the aggregate market for personal and home care products in Africa and the Middle East is expected to grow at 4.4% CAGR by 2024. Galaxy with its presence in these mature and emerging markets is expected to benefit from increased demands. The company's product are the ingredients for the personal and home care products, whose demand are inelastic in nature i.e. end users demand is hardly impacted by the change in the product price. Thus the company's products will continue to be in demand and would have minimal...

Galaxy Surfactants Ltd (GSL) is one of India's leading manufacturer of surfactant and other specialty ingredients which are used in manufacturing of final products like personal and home care. Over the years, GSL has significantly expanded and diversified its product profile, client base and geographical footprints emerging as a global supplier to major FMCG companies like Cavinkare, Colgate-Palmolive (India), Himalaya, Dabur, Jyothy lab etc. Company has demonstrated strong financial performance in the recent years. During FY15-17,...

Incorporated in 1986, Galaxy Surfactants Limited is a manufacturer of surfactants and other specialty ingredients for the personal care and home care industries. The company manufactures are commonly used in consumer-centric personal care and home care products like skin care, oral care, hair care, cosmetics, toiletries and detergent products. Galaxy surfactants product portfolio includes over 200 product grades, which are marketed to over 1,700 customers in 70 countries. Galaxy surfactants products are classified in 2 categories, namely Performance Surfactants and Speciality Care Products. Its clients include Cavinkare Private Limited, Colgate-Palmolive (India) Limited, Dabur India Limited,...

IPO NOTE

IPO Note - Galaxy Surfactants Limited Issue Open: Jan 29 - Jan 31, 2018 Price Band: Rs. 1470 - 1480 Issue Size: 6,331,674 Equity Shares (Entirely Offer for sale) Offer Size: Rs.930.76 cr - 937.09 cr

Galaxy Surfactants (GSL), incorporated in 1986, is one of India's leading manufacturers of surfactants and other speciality ingredients for the personal care and home care industries. The company's products have a profound place in a number of applications in the space of consumercentric personal care and home care product. This includes skin care, oral care, hair care, cosmetics, toiletries and detergent products. Over the years, Galaxy Surfactants has significantly expanded and diversified its product portfolio, client base and geographical footprint with customers including some of the leading multinational, regional and local players in...

Galaxy Surfactants Limited (Galaxy) is one of Indias leading manufacturers of surfactants and other specialty ingredients for the personal care and home care industries. Its products find application in a host of consumer-centric personal care and home care products, including skin care, oral care, hair care, cosmetics and detergent prod..