Hold Gokaldas Exports Ltd For Target Rs. 440- ICICI Direct
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Performance on expected lines; recovery anticipated from H2FY24 onwards...
About the stock: Gokaldas Exports (GEL) is one of India’s leading apparel exporters with an annual capacity of 36 million+ pieces. Gokaldas focuses on manufacturing complex garmenting products that insulate it from other price based competition.
* Impressive clientele of leading international brands with ‘GAP’ and ‘H&M’ being major contributor to revenues. US contributes ~80% of sales
* Under the leadership of the new MD (post exit of Blackstone in FY18), Gokaldas has scripted a successful turnaround of its business operations
Q3FY23 Results: Numbers were in line with I-direct estimates on revenue front while EBITDA and PAT came in above I-direct estimates due to favourable product mix, higher-than-expected other income and low tax rate.
* Reported revenue growth of 19% YoY to | 1613.2 crore. CSM was up 23% YoY to | 1328.6 crore while domestic formulation was up 2% YoY to | 285 crore
* Gross margins grew 73 bps YoY to ~47.2% while EBITDA margin expanded 387 bps YoY to 25.7%. Absolute EBITDA was up 40% YoY to | 415.1 crore
* PAT increased 58% YoY to | 351.8 crore, driven by strong operational efficiency
What should investors do? Since our initiation report, the stock price has appreciated ~6.5x. GEL witnessed a significant re-rating on the back of consistent outperformance despite various headwinds.
* Demand headwinds in key markets in H1FY24 could subdue revenue growth. However, we believe GEL is a long term play in the apparel export space. Hence, we maintain our HOLD recommendation on the stock
Target Price and Valuation: We value GEL at | 440 i.e. 14x FY25E EPS Key triggers for future price performance:
* Charted out capex of | 350+ crore over the next three years, which will have potential to generate incremental revenues worth ~| 1300 crore
* With the recent fundraise (QIP: | 300 crore), the company has strengthened its balance sheet with repayment of ~| 300 crore debt, post which GEL has become net debt free (net cash surplus: | 369 crore)
* Enhanced government focus on apparel exports and China +1 strategy of
Alternate Stock Idea: Apart from GEL, in our textile coverage we also like KPR Mill.
* KPR Mills is among select vertically integrated textile players having one of India’ largest knitted garment manufacturing capacity of 157 mn pieces
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
SEBI Registration number INZ000183631
Above views are of the author and not of the website kindly read disclaimer
