After the company's strong December quarter numbers, brokerage firms have turned positive on the prospects of Galaxy Surfactants stock.
In a BSE filing on February 11, Galaxy Surfactants said its consolidated profit after tax (PAT) for the December quarter of the financial year 2022-23 (Q3FY23) surged 132.8 percent year-on-year (YoY) to ₹106.2 crore against ₹45.6 crore in the same quarter last year.
Total income climbed 16.5 percent YoY to ₹1,084 crore in Q3FY23 from ₹930.9 crore in Q3FY22.
EBITDA jumped 101.9 percent YoY to ₹157.8 crore for the December quarter this year against ₹78.1 crore in the corresponding quarter last year.
Most brokerages cheered the stellar December-quarter scorecard of the company.
The stock has been under pressure for the last one year. Brokerage firms now see healthy upside potential in the stock.
Brokerage firm ICICI Securities upgraded the stock to an 'add' from a 'hold', but cut the target price to ₹2,555 from ₹2,735 earlier, rolling-over valuations to FY25E and reducing PE (price-to-earnings ratio) multiple to 22 times from 28 times FY24E.
ICICI Securities increased its earnings per share (EPS) estimates by 12.4 percent for FY23 and 8.1 percent for FY24E.
"EBITDA growth is likely to be higher than volumes and PAT will grow the fastest. RoCE (return on capital employed) stands at 22 percent. The company believes it will be able to hold to EBITDA growth even as margins currently are at higher levels. This will come from efficient sourcing of key raw materials, improving product mix and in-built strength of the business model," said ICICI Securities.
Brokerage firm Motilal Oswal Financial Services has maintained a 'buy' call on the stock and said that the continued focus on R&D (with an annual expenditure of ₹40-50 crore) and increased wallet share from existing customers are likely to drive volume growth and expand EBITDA margin.
The brokerage firm added although the company plans expansion of products across the board, its focus would be mainly on the speciality care products segment.
"The stock is currently trading at 29 times FY24E EPS and 18 times FY24E EV/EBITDA. We value the company at 35 times Dec’24E EPS, or at ₹85, to arrive at our target price of ₹3,390," said Motilal Oswal.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.
