ICICI Securities research report on Gokaldas Exports
Gokaldas Exports (GEXP), under its new management (since FY18), has witnessed significant changes including marquee client additions, richer product mix, higher margins, etc., leading to robust shareholder returns. We believe, India – with its stable economy, abundant cotton availability, cheaper labour vs China and control over covid – is well placed to wrest a chunk of apparel market share from China and other competitive economies. Hence, India’s textile and apparel industry stands to benefit in the medium term. Further, the government of India’s (GoI) signing of FTAs with various countries (UK FTA likely in H1CY23) and incentive schemes is likely to boost the domestic textile ecosystem and catalyse further growth. GEXP, in the next leg of its growth, is executing a capex of ~Rs3.7bn over FY22-FY25, which includes new greenfield projects and upgrading its existing machineries. This will help: a) diversify its revenue sources (foray into knitwear), and b) potentially boost the topline by ~Rs8bn-9bn over FY23-25E.
Outlook
We estimate EBITDA margin to expand by 100bps on the back of operating leverage benefits and adjusted PAT to register ~18% CAGR over FY22-FY25E. Initiate with a BUY rating and P/E-based (17.5x FY25E) target price of Rs560/sh.
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