The continued focus on research and development (with an annual expenditure of Rs 400-500 million) and increased wallet share from its existing customers should drive volume growth. Margin is also expected to expand gradually.
We estimate a volume compound annual growth rate of Galaxy Surfactants Ltd. is 9% over FY23-25, led by robust volumes in the domestic market and a recovery in the specialty care products volumes in the developed markets, which have already started showing signs of growth.
The stock is currently trading at ~26 times FY25E earning per share of Rs 112.7 and ~16 times FY25E enterprise value/Ebitda.
We value the Galaxy Surfactants at 30 times FY25E earning per share to arrive at a target price of Rs 3,380. We reiterate our ‘Buy’ rating on the stock.