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Balanced portfolio with geographical diversification

* Gokaldas Exports (GEXP) operates a multi-country manufacturer model among Indian apparel exporters. Its manufacturing footprint spans India (52m garments) and East Africa—Kenya and Ethiopia (40m garments through Atraco) for its garments business. Additionally, it holds a 19% stake in BTPL (India), a fabric processing unit with a capacity of ~7m meters/month, supporting backward integration.

* We expect the India business to clock 10% CAGR over FY26–28, with the operating margin at ~12–13%, supported by a capacity addition of 5m pieces. We expect ~26% CAGR over FY26-28 for Atraco, with ~55% utilization. We also project an operating margin of ~9% by FY28, led by higher utilization. BTPL is expected to contribute INR6.6b revenue (net of internal consumption) at a 7% operating margin by FY28.

* GEXP drives growth through deep, direct relationships with leading global apparel brands, ensuring scalability and resilience. Its top five clients – GAP, Carhartt, Columbia, JCPenney, and Abercrombie & Fitch – contribute ~65–70% of revenue, yet GEXP’s penetration within each account remains low, offering notable headroom.

* We model a revenue, EBITDA, and PAT CAGR of 18%, 33%, and 73%, respectively, over FY26-28E, fueled by domestic business supported by Africa.

* We initiate coverage on GEXP with a BUY rating and an EV/EBITDA-based TP of INR1,110, valuing the stock at 14x FY28E EV/EBITDA (25% premium to the 10Y mean).

Geographical diversification helps to sustain growth

GEXP operates a multi-country manufacturer model among Indian apparel exporters. The company’s manufacturing footprint spans India (52m garments) and East Africa—Kenya and Ethiopia (40m garments through Atraco) for its garments business. Additionally, it holds a 19% stake in BTPL (India), a fabric processing unit with a capacity of ~7m meters per month, supporting backward integration. We believe the India business, excluding Matrix revenue, would grow 10%, led by a 2% improvement in realization (realization per piece at INR765 as of FY26), with over 85% capacity utilization. Matrix India (realization per piece at INR570 as of FY26) expects 10% growth with a 68% utilization level. We expect 26% CAGR over FY26-28 for Atraco, with 55% utilization. We also project a high single-digit operating margin of 9% by FY28, led by higher utilization and higher throughput per line. BTPL is expected to contribute INR6.6b revenue (net of internal consumption) at a 7% operating margin by FY28. We expect the consolidated business to clock a 18% CAGR during FY26-28, with 11.3% operating margin in FY28 (expansion of 240bp from FY26).

Successful M&A the key enabler for GEXP’s growth strategy

GEXP’s recent M&A signals a shift from incremental capacity expansion to strengthening its structural competitiveness across cost, complexity, and geographic diversification. The Atraco acquisition (Aug’23) provides significantly lower labor costs and favorable tariff structures. Despite initial integration challenges, including workforce re-badging, operations have stabilized, with ongoing capacity expansion expected to increase total capacity to 45m units and utilization to 55% by FY28. The acquisition of Matrix Clothing (Feb’24) strengthens GEXP’s product portfolio by establishing a dedicated knitwear vertical, addressing the earlier gap in its predominantly woven-focused mix. Further, its exports are diversified across North America (76%), Europe (8%), and Asia (16%); the acquisition adds a largely non-overlapping client base, strengthening access to Europe/UK and reducing US dependence. GEXP’s backward integration into fabric processing through BTPL is a critical pillar of its long-term investment thesis. We expect BTPL to generate revenues of INR6.6b in FY28 (net of internal consumption) with 7% EBITDA. Together, these acquisitions reposition GEXP for sustained double-digit growth and margin expansion over FY26-28E.

Valuation & view: Initiate coverage with a BUY rating

We initiate coverage on GEXP with a BUY rating and an EV/EBITDA-based TP of INR1,110, valuing the stock at 14x FY28E EV/EBITDA (25% premium to the 10Y mean led by better visibility and 3x PAT growth). We believe GEXP benefits from a well-diversified portfolio and a multi-country manufacturing model, providing a competitive edge over peers, though clarity on FTAs and US tariffs may speed up revenue growth in the medium term, in our opinion. As integration stabilizes, we expect margin improvement of ~240bp over FY26-28E.

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