Gokaldas Exports rises 9% to hit 52-week high on hopes of better outlook

The management highlighted that most US customers could start buying from Q3FY24 for the next season and overall demand should improve from Q4FY24.

Shares of Gokaldas Exports rallied 9 per cent to hit a 52-week high of Rs 497.15 per share on Monday's intra-day trade, on hopes of improvement in business outlook.

In the past one month, the stock surged 29 per cent, as compared to 1 per cent rise in the S&P BSE Sensex. Last year in May, it had hit a record high of Rs 519.55.

Gokaldas Exports is one of India's leading apparel exporters with an annual capacity of over 36 million pieces. The company has a clientele of leading international brands with 'GAP' and 'H&M' being major contributor to revenues. US contributes nearly 80 per cent of sales.

On account of a slowdown in the order book for spring-summer production, the company’s revenue declined 11 per cent year-on-year (YoY) to Rs 523 crore in Q4FY23 (grew marginally by 1 per cent QoQ).

Despite weak sales, Gokdaldas Exports continued to maintain double digit earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins for the seventh consecutive quarter at 13.4 per cent through various cost saving initiatives.

Finance cost, however, declined 34 per cent YoY, owing to repayment of debt, while other income more than doubled. Profit after tax was at Rs 47.2 crore in Q4FY23 versus Rs 60.9 crore, in the year-ago period.

Going ahead, the management expects demand situation to improve in the second half of the year.

"The company is committed to gain market share and prepare for business growth when market conditions turn more favorable. The company recently added two new customers - one US-based and one UK-based and is hoping that it shall be able to continue to grow with them," they added.

Analysts at ICICI Securities expect the revenue trajectory to remain muted in FY24E, owing to significantly high base of H1FY23.

“We expect Ebitda margins to remain flattish in FY24E at 12 per cent (YoY) on account of a slowdown in revenues and preoperating expenses. Better productivity and gradual contribution from knitting segment (which yields enhanced margins) should propel margins in FY25E (build in 90 bps YoY expansion),” the brokerage firm said.

That said, analysts also believe that the long-term prospects for the industry remain intact with continous shift of global sourcing away from China, supplier consolidation towards efficient, well capitalised players, favorable currency, production-linked incentive (PLI), and free trade agreements (FTAs).