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- 25 Jul 2022
- ICICIdirect Research
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GOKALDAS EXPORTS REPORTS RESILIENT PERFORMANCE AMID CHALLENGING SCENARIO
GOKEX - 960 Change: 16.25 (1.72 %)News: Gokaldas Exports (GEL) reported resilient performance in Q1FY23, despite various challenges. On a significantly high base of Q4FY22 revenue grew 4% QoQ (up 153% YoY) to Rs 610.6 crore. On a sequential basis, gross margins remained flattish at 45.4% (down 675 bps YoY). Employee expenses grew 11% QoQ to Rs 170.7 crore mainly on account of wage hike (~5%) and capacity expansion. Subsequently, EBITDA margins declined by 130 bps QoQ to 11.8% (up 439 bps YoY).
Views: As indicated by the management, healthy order book during H1FY23 translated into strong topline growth in Q1FY23 (highest quarterly revenue). Despite sharp rise in cotton prices, company was able to maintain gross margins on a sequential basis, however higher employee expenses (owing to wage hike) led to sequential decline in EBITDA margins. Recent correction in cotton prices (~25% from all-time highs) augurs well for entire textile value chain going forward. However, slowdown in consumer demand in key export markets (USA: ~85% of revenues) and excess inventory issues at the retail level could impact order book from H2FY23 onwards. GEL has initiated work on a new greenfield unit in Madhya Pradesh that is expected to be commissioned in early FY23E (potential revenue: Rs 150 crore). It has charted out capex of Rs 340 crore over the next four years which will have potential to generate incremental revenues worth ~Rs 1300 crore (4.0x A/To). We like Gokaldas Exports as a structural long term story to play the apparel export space, however near term challenges could lead to volatility in revenue and earnings trajectory.
Impact: Positive