Gokaldas Exports Q3 Results Review - Margins Rebound Sequentially; Acquisition To Be EPS Accretive: Systematix

Systematix Report

Gokaldas Exports Ltd.’s Q3 FY24 revenue grew 6% YoY and 10% QoQ to Rs 5.5 billion (11% below our estimate), led by healthy 19% YoY volume growth at ~7.58 million pieces, signaling increased traction in order placements. Gokaldas Exports expects sales growth to gradually outpace inventory, as supply chain trends improve and customers liquidate a substantial portion of their inventories.

Management is confident of sustaining its consolidated FY24 revenue (flat YoY) once it completes atraco acquisition in January 2024. However, FY24 standalone revenue could slightly disappoint on FY23 numbers. Management expects pricing to remain under pressure until Q3 FY25 (supply to exceed demand) and rebound from Q4 FY25 onwards (once the demand-supply situation improves).

In the near term, consolidated Ebitda margin may slip, as atraco operates at lower Ebitda margin. However, management is confident that margins should normalize in next two-three years. Consolidated profit after tax may be strong as atraco benefits from tax-free status.

We have slashed earning per share by 6%/13%, respectively and roll forward valuations to FY26E.

Reiterating 'Buy' with a revised target price of Rs 1,119 (Rs 935 earlier), based on 25 times FY26E earnings (earlier 23 times).

Key risks: High cotton prices and labour costs, geopolitical tensions, and inflation.

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