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Gokaldas Exports (GEXP) delivered an adj. PAT of INR472mn, significantly above JMfe of INR368mn. The beat was largely on account of lower tax expense. The company delivered EBITDA margins of 13.4% during 4Q on account of superior cost management and operational excellence. GEXP remains hopeful of market conditions improving from 2HFY24, in time for summer/spring’24 collection. Near term demand is expected to remain muted as global retailers continue to remain cautious amidst demand uncertainty. Despite near term uncertainty, long-term prospects for the industry remain intact with a continuing shift of global sourcing away from China, supplier consolidation towards efficient / well-capitalized players and supply-side instabilities in several competing nations. We believe Gokaldas Exports is well placed to benefit from these industry tailwinds under the leadership of Mr S. Ganapathi. The company continues to progress with its capex plan and expects the Madhya Pradesh (greenfield expansion Phase I) / Tamil Nadu (knits facility) to commence production in Jun’23/ Sept’23, in time to meet the additional demand. GEXP expects revenue of ~INR500mn during FY24 from MP plant while the company expects ~INR3bn revenue from new plants during FY25. Further, FTAs with UK/EU over time are likely to increase the addressable market size and is likely to benefit Gokaldas Exports. Maintain BUY. (refer exhi. 3).

* Margin improvement aided by superior cost management: Gokaldas Exports reported sequentially flat revenue of INR5.2bn during 4QFY23 in line with market conditions dominated by major brands consciously liquidating excess inventory. EBITDA increased by 10.9% QoQ to INR701mn, with margin at 13.4% during the quarter aided by superior cost management. The company reported a PAT of INR472mn in 4Q. Net cash position stood at INR3.3bn.

* Demand revival likely from 2HFY24: Gokaldas Exports expects demand revival from 2HFY24 in time for summer/spring’24 collection. Demand for 1HFY24 is expected to remain muted as global retailers continue to remain cautious amidst demand uncertainty.

* Customer additions showcase GEXP’s operational excellence: GEXP added two new customers one from US and the other from UK. The US customer has on boarded on account of GEXP’s efficiency and operational excellence while the UK customer intends to take advantage of the FTA. Revenues from these customers will begin from FY24. Further, the company has been able to improve their wallet share from current customers which shall benefit the company once demand environment improves.

* Long term drivers in place to aid the industry: The long -term prospects for the industry remain intact with a continuing shift of global sourcing away from China, supplier consolidation towards efficient / well-capitalized players and supply-side instabilities in several countries. Favourable currency, PLI and FTAs with key markets should drive demand for the company.

* Gokaldas Exports remains well placed despite near term uncertainty: Gokaldas Exports remains well placed to benefit from Industry tailwinds once demand situation stabilizes. The company continues to progress with its capex plan (despite near term uncertainty) and expects the Madhya Pradesh / Tamil Nadu (Knits facility) to commence production in Jun’23/ Sept’23, in time to meet the additional demand. The company expects revenue of ~INR500mn during FY24 from MP plant while the company expects ~INR3bn revenue from new plants during FY25. Further, FTAs with UK/EU over time are likely to increase the addressable market size and we believe Gokaldas Exports is best positioned to capture this opportunity.

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