Equity Research Report - Gokaldas Exports Limited

Summary

Delivering in Style since 1979

Company Overview:

Gokaldas Exports Limited has been a leading apparel manufacturer since 1979, designing, manufacturing, and exporting a diverse range of apparel products for all seasons.

The Company exports to a number of the world's most prestigious fashion brands and retailers in more than 50 countries.

Gokaldas Exports’ strength lies in its robust in-house capabilities which encompass its skilled labour and its manufacturing facilities that are equipped with state-of-the-art technologies.

Our integrated manufacturing facilities enable us to be present across the entire value chain, thus also facilitating us to cater to myriad requirements of our customers. We consistently strive to improve ourselves by enhancing our capacities and capabilities through investments in people, process and automation. The quality of our products, reliability and our expertise sets us apart.

Key Statistics:

Market Cap: Rs. 2032 Cr.

Current Price: Rs. 335.1/-

52W High: Rs. 519.9/-

Stock P/E: 11.7

Book Value: Rs. 121.3

Dividend Yield: 0%

P/B: 2.8

Face Value: Rs 5/-

52W Low: Rs. 185/-

Source: www.sharescart.com

Shareholding Pattern (%):

Peer Comparison:

Source: www.sharescart.com

Growth Drivers:

Coming out stronger:

• Gokaldas Exports continues its exceptional growth trajectory, despite a challenging macro-economic business environment. The solid revenue and profit growth were driven by excellence in execution and optimal utilization of capacity. Seasonally H1 is relatively weak for the Indian apparel industry, as during this period brands tend to source synthetic apparel for Autumn/Winter, while India is more strongly rooted in the cotton fibre ecosystem which caters largely to Spring/Summer demand.
• Looking ahead, anticipating changes and planning for eventualities, we persevered and delivered. Our newly commissioned manufacturing units in Karnataka and Tamil Nadu, are ramping up well, and our project work for the new factories is progressing well. We continue to manage our working capital well and generate adequate free cash flow to support our growth ambition.

·         Our entire team worked hard to deliver exceptional product quality and service to our customers. We continue to outperform on various customer delivery matrices. I thank all the stakeholders who supported us through this journey as we battle business headwinds and yet come out stronger. 

·         Continue to Invest in Machinery for Expansion and Up gradation with Rs. 116 Crores OF CAPEX DURING THE LAST FIFTEEN MONTHS.

·         The company plans to invest Rs. 250 Crores on various new initiatives, on the existing, ongoing projects in the next two years.

·         The continuing trend of rising contribution from E-com US E-com clothing and accessories sale continues to witness stable growth over a high base. CY22 E-com YTD sales witnessed a moderate growth of 7% compared to CY21.

·         India’s apparel export continues to remain strong India’s global apparel export grew over 30% in the last six months (Jan-Jun’22) to US$ 9.3 Bn. when compared same period a year ago 7.5%. India’s export to the US from Jan to May’22 has increased by 56% YoY and India’s share of exports to the US has increased compared to other countries (from 28% to 36% YTD CY 2022).

·         The recent development in the macro-economic factors signals that key textile commodities like Cotton and Crude oil have started to decline (by 20% from the recent high) easing price pressure on the textile value chain. Further, there is evidence of decongestion of the supply chain. Freight costs also may continue to decline if oil price falls.

Source: Company Earning Presentation

Outlook for FY23:

We cannot change the direction of the wind but can adjust the sails to reach the destination. We see headwinds in the near term and strong tailwinds supporting the ongoing growth of the business. Large brands are wary of slower consumer off take in the seasons ahead, till inflationary trends persist. They are also battling higher levels of inventory from last year. It is expected that this may impact imports in the short run. Simultaneously, several opportunities are presenting themselves in the form of continuing shift of global sourcing away from China, supplier consolidation towards efficient and well -capitalized players, supply side instabilities in countries like Sri Lanka, Pakistan and Myanmar, favourable currency, announcement of PLI and signing of FTAs with key markets. While order book for H2 is work in progress, we see reasonable traction for us. Falling raw material prices is aiding the industry. Despite near term headwinds, we anticipate good growth in FY23 and a surge from FY24.

Source: Company Earning Presentation

Financial Snapshot :

Balance Sheet (Rs. in Crores):

Profit and Loss Account (Rs. in Crores):

Cash Flow Statement (Rs. in Crores):

Source: www.sharescart.com 

VALUATIONS:

On the basis of Discount Cash Flow Valuation Method, we

are recommending ‘Buy’ for the stock. Since the stock

offers good opportunity, we initiate a ‘BUY’ signal on the

stock with 12-month price target of Rs 429/- share an

upside of 28.00 % from current levels.