Galaxy Surfactants IPO opens today for subscription and several equity research analysts have come up with their recommendations. The specialty chemicals player has already placed 1,899,500 shares to 33 anchor investors at the upper end of the price band of INR1,470 – 1,480 per share for INR281.13 crore (INR2.81 billion). The investors include ICICI Prudential, Abu Dhabi Investment Authority, DSP Blackrock, Kuwait Investment Authority, Reliance Capital and others. The strong lineup augurs well for the company and this is reflected in analyst recommendations which are largely positive. Here is a quick overview of Galaxy Surfactants IPO recommendations by major brokerage houses.
Nirmal Bang has a subscribe recommendation for the IPO and has cited strong and consistent business expansion as the primary factor behind its positive view. “Galaxy Surfactants has shown consistent growth in sales as well as profitability. Personal Care and Home Cleaning are matured markets which explain the muted sales growth of 8% CAGR between FY13-17 however due to economies of scale; EBITDA grew by 22% over the same period. We believe the valuations are fair considering GSL’s strong financial strength in terms of healthy return ratios, free cash flow generation and sound asset turnover ratios. At higher band the issue is offered at 35x 1HFY18 annualised earnings. We like the company’s strong position in its niche area in addition to strong pedigree of management. We recommend investors to subscribe the issue for long term gains,” noted Runjhun Jain of the brokerage house.
Another positive word has come from Hem Securities. “The company being established global supplier to major FMCG brands with demonstrated track record has robust product portfolio & proven R&D capabilities with strong presence in high growth markets of India and AMET region. Looking after strong fundamentals & financial performance, we recommend “Subscribe” on issue,” said the firm’s report.
Angel Broking also included itself among brokerage houses with positive Galaxy Surfactants IPO recommendations. “At the upper end of the price band, the P/E multiple works out be 36x (pre issue equity base) of FY17 EPS. The company has seen 25% CAGR in the last 3 years in earnings. We expect the company to maintain a 20%+ growth trajectory in the coming few years, considering growing personal care markets, its increasing product offerings and geographies. We recommend ‘SUBSCRIBE’ on the issue for a mid-to-long term period,” noted analyst Nidhi Agrawal.
While SMC Global Securities acknowledged Galaxy Surfactants has a first movers’ advantage, it offered only 2.5 stars to the IPO. “SMC Research too said that the company is an established global supplier to major FMCG brands. Over the years, it has significantly expanded and diversified its product profiles, client base and geographical footprints. It has no listed peers to compare with, thus it is a first mover in this segment, the report stated,” said its IPO note. The rating corresponds to a value between Neutral and Fair.
Centrum Broking feels the IPO is good for listing gains, while adding that valuations are fair. “Given the decent financials and future growth prospects, the IPO could garner interest in the current market environment. Hence, we believe that despite fair valuations, the listing may still be at a premium to the offer price,” the brokerage house said in a report.
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SSJ Finance is another name in positive views for Galaxy Surfactants IPO recommendations. “Galaxy has reported a CAGR of 8.4% and 24.4% on revenue and net profit fronts respectively over FY2014-2017. On its upper band of price of Rs 1480, the issue is priced at PE ratio of 34.9x of its H1FY2018 annualised EPS of Rs 42.4. We believe that the IPO is fairly priced leaving a room for upside. Hence, we recommend to Subscribe the IPO,” said the equity research firm.
As one can see, Galaxy Surfactants IPO recommendations are positive and analysts are sold on the company’s growth prospects. This is something we also highlighted in our analysis of the public offer. As some analysts have pointed out, the valuations are rich which means post-listing gains may be limited, although strong grey market premium indicate to a happy listing. Head to this page to see what fellow investors have to say about the IPO.