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Gokaldas Exports: Healthy recovery on the back of robust order book

News: Gokaldas reported one its best quarterly performances driven by healthy demand in the US apparel market. Revenue grew 30% YoY to Rs.443.8 crore (up 84% QoQ). The company maintained its gross margins at ~50% (up 140 bps YoY). On account of positive operating leverage and foreign exchange gain, GEL reported one of its highest EBITDA margins of 11.7% (up 285 bps YoY). During the quarter, the company has set up two units in Karnataka (Tumkur and Bommanahalli), which is expected to be ramped up in the next six months (potential revenue: Rs.160 crore) Furthermore, it has also initiated work on a new greenfield unit in Madhya Pradesh that is expected to be commissioned in early FY23E (potential revenue: Rs.150 crore).

Views: Production is currently running at peak utilisation levels with robust order book for the next six months. It has charted out capex of Rs.340 crore over the next four years (by FY25E) which will have potential to generate incremental revenues worth ~Rs.1350 crore (4.0x A/To). The company is exploring opportunities in various states to increase its garment capacity. Further, the management indicated it is looking at entering new business segments like technical textiles, knitwear and setting up manufacturing units in cost efficient countries like Bangladesh. We like Gokaldas Exports as a structural long term story to play the apparel export space.