- 28 Oct 2022
- ICICIdirect Research
GOKALDAS' RESILIENT PERFORMANCE CONTINUES IN CHALLENGING SCENARIO
GOKEX - 1131 Change: 24.60 (2.22 %)News:
Owing to a strong order book, revenue for the quarter grew 28% YoY to Rs 569.7 crore. Q2 is generally a weak quarter for India’s garment industry, as a whole, owing to higher proportion of synthetic fabric garments exported (autumn-winter wear), as India’s strength mainly lies in cotton wear (H2FY23). On a sequential basis, as anticipated, revenue for GEL declined 7%. We note that overall India’s garment exports during Q2FY23 declined ~ 15% QoQ, which signifies sustained market share gains for Gokaldas Exports. The company has continued to maintain double digit EBITDA margins in the fifth consecutive quarters at 11.5% (Q2FY22: 11.7%, Q1FY23: 11.8%). PBT grew 71% YoY (down 3% QoQ) to Rs 49.0 crore
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Recent correction in cotton prices (~35% from all-time highs) augurs well for entire textile value chain, going forward. However, slowdown in consumer demand in key export markets (US: ~85% of revenues) and inventory issues at the retail level could weigh on the near terms performance. Managements commentary on order book traction for spring-summer 2023 remains the key monitorable to watch (H2FY23 is the most critical quarter for Gokaldas). GEL has initiated work on a new greenfield unit in Madhya Pradesh that is expected to be commissioned by Q4FY23 (potential revenue: Rs 160 crore). Further, it has charted out capex of Rs 365 crore over the next three years, which will have potential to generate incremental revenues worth ~Rs 1300 crore (4.0x A/To). With enhanced working capital management (generated OCF worth Rs 305 crore in H1FY23), the company continues to strengthen its balance sheet with net cash surplus of Rs 369 crore (FY22: Rs 119 crore)
Impact:
Neutral