Gokaldas Exports Ltd. share price target

Volumes gain momentum; margin improves

Acquisitions drag performance; recovery expected in H2

Gokaldas Exports’s (GKEL’s) LFL performance was good with revenues growing strongly by 28% y-o-y to Rs. 652 crore, EBIDTA margins stood flat y-o-y at 11%.

Gokaldas Exports Limited’s (GKEL’s) Q1 performance was affected by lower margins due to higher freight costs and labour costs. Revenue grew ~13% on like-for-like (LFL) basis, while adjusted EBITDA margin stood at 10.5%

Volumes healthy, margins suffer; expect a strong H2

Gokaldas Exports Limited’s (GKEL’s) Q4 numbers were good with like-for-like (LFL) revenue growth of 14% (largely volume led), while adjusted EBIDTA margins came at 14.4%.

Demand revives; Matrix acquisition to provide further upside

Gokaldas Exports (GEXP)’s Q2FY24 consolidated EBITDA, at INR 470mn (down ~28% YoY), was below our expectations. Revenue at ~INR 5bn was down ~12%/3% YoY/QoQ owing to continued demand softness and inventory liquidation in GEXP’s end-market (US).

Earnings subdued, revival on the cards

Gokaldas Exports (GEXP) has signed a definitive agreement with the shareholders of UAE-based apparel maker, ATRACO, to acquire 100% of the latter’s equity for a total consideration of up to USD 55mn funded through debt (73%) and internal accruals (27%). ATRACO exports 95% of its production to the US (primary market for GEXP) and has nearly mutually exclusive customer base with GEXP.

Gokaldas Exports’ (GEXP) Q1FY24 consolidated EBITDA at INR 602mn, down 17% YoY, was slightly below our expectations. Revenue at ~Rs5bn was down 16% / 2% YoY / QoQ owing to continued demand softness and inventory liquidation in the company’s end-market (US). Management maintains its guidance of demand revival in the US H2FY24 onwards as, by then, retailers will place fresh orders for spring / summer of CY24.

Weaving the opportunities together

Gokaldas Exports (GEXP) has delivered stellar returns (<25%) in the past one month as we believe the street seems to have factored in the exuberance (China+1, margin expansion, etc.) a bit too early. A few concerns: 1) As per the latest exports data, India’s Apr-May’23 RMG exports are down ~12% YoY.

Gokaldas Exports’ (GEXP) Q4FY23 consolidated EBITDA at Rs701mn, although down 8.5% YoY, was above our / consensus expectations. Revenue at Rs5.2bn was flat QoQ (down 11% YoY) due to soft demand scenario in the company’s end-market (US).

Gokaldas Exports’ (GEXP) Q3FY23 consolidated EBITDA at Rs632mn (up 7% YoY) was above consensus expectations. Revenues at Rs5.2bn were flat YoY (down 9% QoQ) due to soft demand scenario in the company’s end-market (US). Flat revenue growth was in line with similar growth in Indian apparel exports in Q3FY23.

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.