Gokaldas Exports Ltd. share price target

Textile companies are focusing on diversification as risk mitigating strategy with focus on diversifying the production base in other countries and improve the regional mix and not to depend on single country/region in the near future....

Retention of clients by sacrificing margins in the near term: In the backdrop of higher tariff of 50%, Gokex management has given more impetus on client retention by providing discounts of 15-18% rather maintaining the EBIDTA margins. It has good order book outlook for Spring summer season till Q4FY26. With this strategy management expects revenues to remaining at Rs900-1000crore (after discount of 18% on additional tariff of 25%) per quarter, while consolidated EBIDTA margins...

GKEL’s Q4FY25 LFL performance was strong with revenue (including other income) growing by 17% y-o-y to Rs. 706 crore and EBITDA margin expanding by 76 bps y-o-y to 14.4%.

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).