Galaxy Surfactants Shares Zoom Over 8% to Hit 52-Week High on Heavy Volumes: An In-Depth Fundamental Analysis of the Rising Midcap

Galaxy Surfactants has been a key player in the specialty chemicals space, and on September 16, 2024, its stock surged over 8%, reaching a 52-week high of Rs 3,325 on the National Stock Exchange (NSE). The rally was driven by significant trading volumes, with 1 lakh shares changing hands on the BSE and NSE combined, far exceeding the monthly average of 27,000 shares. This price movement highlights the growing interest in the company’s performance and potential, further fueled by an encouraging financial performance in the first quarter of FY25.

In this blog, we’ll conduct an in-depth fundamental analysis of Galaxy Surfactants, focusing on its growth trajectory, financial performance, and future potential. The stock’s recent performance and high trading volume demand a closer look, especially in light of the company’s position in the specialty chemicals industry, a growing sector in India and globally.

Company Overview: A Glance at Galaxy Surfactants

Founded in 1986, Galaxy Surfactants has positioned itself as India’s largest manufacturer of oleochemical-based surfactants and specialty care products. These products are critical to home and personal care industries, being used in everything from shampoos and skin creams to detergents and cosmetics.

The company boasts a wide product portfolio, offering more than 210 products under its Performance Surfactants and Specialty Care divisions. These include formulations for hair care, skin care, oral care, and home care products. Galaxy Surfactants is a trusted supplier to a diverse range of multinational corporations (MNCs) such as Unilever, P&G, L’Oréal, and Colgate Palmolive.

In FY23, the company reported a revenue mix of 65% from Performance Surfactants and 35% from Specialty Care products. The geographical revenue distribution was also noteworthy, with 61% of revenues coming from overseas markets and 39% from India, highlighting the company’s global footprint.

Recent Financial Performance: Q1 FY25 Highlights

The company’s net profit for Q1 FY25 stood at Rs 79.7 crore, marking a 6% year-on-year (YoY) growth. Despite challenging global conditions like logistical disruptions and high freight costs, Galaxy Surfactants maintained a stable performance.

• Revenue growth: The company reported revenues of Rs 979.5 crore, a modest 3% YoY growth.
• EBITDA growth: Earnings before interest, tax, depreciation, and amortization (EBITDA) for the quarter came in at Rs 129.5 crore, reflecting a 3% YoY increase.
• EBITDA margin: The EBITDA margin for the quarter remained stable at 13.2%, indicating operational efficiency despite cost pressures.

K. Natarajan, Managing Director of Galaxy Surfactants, expressed optimism about the company’s performance, particularly in the premium specialty segment. According to him, there are signs of improving demand across geographies, which should boost the company’s overall profitability in the coming quarters.

Historical Financials: A Deep Dive

To better understand the company’s current position and future potential, let’s take a look at its historical financial performance:

• Sales, Net Profit & Operating Profit (FY18 – FY25 Prediction):

• In March 2023, Galaxy Surfactants reported sales of Rs 4,462 crore, with a net profit of Rs 301 crore.
• The company’s operating profit for the same period stood at Rs 462 crore, showcasing steady growth over the years.
• The predictions for March 2025 show further optimism, with expected sales of Rs 4,247 crore and a net profit of Rs 337 crore.
• Operating Profit Margin (OPM %):

• The company’s OPM has fluctuated over the years, hitting a high of 16.14% in March 2021. Despite some dips, the company has maintained a steady OPM of around 12%, with a prediction of 17.67% for March 2025.
• Earnings Per Share (EPS):

• EPS has steadily increased from Rs 44.57 in March 2018 to Rs 107.46 in March 2023, reflecting the company’s consistent profitability.
• The projected EPS for March 2025 is Rs 95.23, which would reflect continued strong performance.
• Return on Equity (ROE):

• ROE peaked at 23.21% in March 2021 before dipping to 13.81% in March 2023. Despite the decline, the company’s ROE remains healthy, with an expected rebound to 15.22% in March 2025.
• Asset & Liability Distribution:

• The company’s assets include Rs 973 crore in fixed assets and Rs 1,576 crore in current work in progress (CWIP), showcasing a strong investment in infrastructure.
• On the liabilities side, Galaxy Surfactants has Rs 2,144 crore in borrowings, alongside equity capital and reserves of Rs 539 crore.

Future Outlook: Short-Term and Long-Term Prospects

Given the company’s consistent financial performance and robust market position, here are the potential short-term and long-term targets for investors, the stock is currently trading at Rs 3,293 as on 16/09/2024

• Short-term target (3 months): Rs 3,500
• Long-term target (12 months): Rs 4,000
• Stop-loss level: Rs 3,000

Why Should You Consider Galaxy Surfactants for Investment?

The company has demonstrated consistent revenue and profit growth, with stable margins and a healthy balance sheet. This makes it an attractive option for investors looking for a reliable midcap with growth potential.

• Strong Market Position:As India’s largest manufacturer of surfactants, Galaxy Surfactants has a dominant position in both the domestic and international markets. Its relationship with major MNCs ensures a steady revenue stream.
• Diversified Product Portfolio:The company’s wide range of products across various segments (home care, personal care, etc.) allows it to mitigate risks associated with dependency on a single market or product.
• Global Presence:With 61% of revenues coming from overseas markets, Galaxy Surfactants has a well-established global footprint, making it less vulnerable to fluctuations in the Indian market.
• Sustainability Initiatives:Galaxy Surfactants has also launched eco-friendly products like Galseer Tresscon and GalMOL CCT, aligning with the growing global trend toward sustainability.
• Solid Financials:The company has demonstrated consistent revenue and profit growth, with stable margins and a healthy balance sheet. This makes it an attractive option for investors looking for a reliable midcap with growth potential.

Conclusion

Galaxy Surfactants has consistently delivered solid financial performance, even in the face of global challenges. Its diverse product portfolio, strong market position, and commitment to sustainability make it a compelling investment choice. With short-term and long-term growth prospects looking bright, Galaxy Surfactants could be a rewarding addition to any investor’s portfolio.

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