Whalesbook
Motilal Oswal's latest report highlights a weak second quarter for Galaxy Surfactants, with EBITDA falling 13% year-over-year due to global tariffs and domestic GST adjustments. Despite flat overall volumes, regional growth partially offset domestic slowdowns. The brokerage has reduced earnings estimates for fiscal years 2026-2028 by up to 11% but maintains a 'BUY' recommendation with a target price of INR 2,570 per share, based on 27 times fiscal year 2027 earnings.
Motilal Oswal's research report indicates a challenging second quarter for Galaxy Surfactants (GALSURF) in fiscal year 2026. The company reported a significant 13% year-over-year decline in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The EBITDA per kilogram also saw an 11% year-over-year decrease, settling around INR 17.
Several factors contributed to this performance dip. Global tariff headwinds created a challenging international trade environment. Within the performance segment, ongoing product reformulation efforts impacted profitability. Domestically, sales volumes were affected by inventory adjustments related to the Goods and Services Tax (GST) implementation.
Overall volumes remained stable, showing no significant change year-over-year or quarter-over-quarter. While domestic and North American markets experienced short-term disruptions leading to softness, this was counterbalanced by strong double-digit growth observed in the Latin America and Asia-Pacific regions.
Factoring in the weaker-than-expected second quarter results and the prevailing challenging macroeconomic conditions, Motilal Oswal has revised its earnings per share (EPS) estimates downwards. Earnings for fiscal years 2026, 2027, and 2028 have been cut by 11%, 11%, and 9%, respectively.
Despite the earnings cut and current challenges, Motilal Oswal reiterates its 'BUY' rating on Galaxy Surfactants. The firm has set a target price (TP) of INR 2,570 per share. This valuation is based on a price-to-earnings multiple of 27 times the estimated EPS for fiscal year 2027.
Impact
This news is significant for investors as it provides a professional assessment of Galaxy Surfactants' recent performance and future outlook from a reputable brokerage. The earnings revision and target price indicate potential future stock movements. The factors cited for the performance decline (tariffs, GST, reformulation) are key indicators of operational challenges and market dynamics. Rating: 6/10.
Difficult Terms:
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance before considering the impact of financing decisions, accounting decisions, and tax environments.
YoY: Year-over-year. This compares a company's performance in a given period to its performance in the same period of the previous year.
QoQ: Quarter-over-quarter. This compares a company's performance in a given quarter to its performance in the immediately preceding quarter.
GST: Goods and Services Tax. A consumption tax imposed on the supply of goods and services in India.
EPS: Earnings Per Share. A measure of a company's net profit allocated to each outstanding share of common stock.
TP: Target Price. The price at which an analyst or broker believes a stock will trade in the future.
E: Estimated. Used with fiscal years (e.g., FY27E) to denote projected figures.
