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Robust earnings growth due to broad-based volume recovery Strong beat on our estimates

* Galaxy Surfactants (GALSURF) delivered a strong 1QFY27 performance, with EBITDA growing 2x YoY, while EBITDA/kg jumped 77% YoY to ~INR35, driven by strong performance in the US Specialty business, continued momentum in premium specialties, and a sharp recovery in India volumes.

* The India volume grew in low double digits YoY, driven by strong demand from Tier-1 customers and the return of reformulation-related volumes that had been impacted in earlier quarters. The Africa, Middle East & Turkey (AMET) region witnessed a low-single-digit YoY decline due to geopolitical disruptions in West Asia. The Rest of the World (RoW) delivered mid-single-digit growth, fueled by the Asia-Pacific region and improving momentum in the Americas following the revision of the US tariffs.

* Going forward, volume growth is expected to strengthen, supported by the continued recovery in India, led by a rebound in Tier-1 customers. ROW and AMET volumes are also expected to improve, aided by the reversal of US tariffrelated disruptions and the normalization of operations in Egypt, respectively.

* Backed by a robust 1Q and the increase in EBITDA/mt guidance from INR19k21k per MT to INR24k-INR25k per MT, we raise our earnings estimates by 22%/15% in FY27/FY28. Reiterate BUY with a TP of INR3,160 (based on 25x FY28E EPS).

Key highlights from the management commentary

* Guidance: Management anticipates exiting the year on a stronger footing, maintaining its 6-8% volume growth guidance while raising full-year EBITDA/MT guidance to INR24,000-25,000 from INR19,000-21,000, supported by a favorable mix, operating leverage, and resilient demand. The robust new product pipeline, with several launches planned in 2Q, should sustain growth momentum, with capex maintained at ~INR1.5b.

* India returned to double-digit volume growth after nearly two years, with volumes rising 11% YoY and 18% QoQ, driven by a broad-based recovery across Tier-1 and non-Tier-1 customers, normalization of reformulation-related disruptions, and resilient rural demand; management expects momentum to remain strong, supported by the festive season, elevated alcohol prices, GST 2.0, and continued recovery in Tier-1 markets.

* International volumes showed a strong sequential recovery, with AMET volumes declining 4% YoY but growing 18% QoQ as West Asia-related disruptions eased, while ROW delivered mid-single-digit growth, led by APAC and improving North American demand following the US tariff rationalization. The Mexico project remains on track for commercialization over the next 12 months, supporting the region’s return to a stronger growth trajectory.

Valuation and view

* While the macro environment remained challenging in 1Q, marked by significant feedstock volatility, the company’s disciplined execution, supply chain agility, and diversified portfolio enabled it to navigate external headwinds effectively and emerge stronger.

* Going ahead, we expect GALSURF’s growth to be driven by

1) the company’s consistent focus on R&D and innovation

2) growing domestic demand led by the recovery in Tier 1 customers

3) likely growth recovery in AMET

4) expanding global operations

5) strong pipeline of new products.

* We expect a CAGR of 14%/23%/27% in revenue/EBITDA/adj. PAT, along with a volume CAGR of 8% over FY26-28. Backed by a robust 1Q and the incarese in EBITDA/mt guidance from INR19k-21k per MT to INR24k-INR25k per MT, we raise our earnings estimates by 22%/15% in FY27/FY28. Reiterate BUY with a TP of INR3,160 (based on 25x FY28E EPS)

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