Weaving the next growth story…
About the stock: Gokaldas Exports (Gokex), incorporated in 1979, is one of India’s largest manufacturers and exporters of apparel, exporting it to 50+ countries. Its vertical integrated business model makes it a one stop destination for leading apparel brands. Following the acquisition of Atraco and Matrix, Gokex currently has over 34 production units that can produce about 90 million garments per annum (p.a).
Investment Rationale
• Integrated textile player: Gokex has transformed itself into one of the top integrated textile players focusing on operation excellence, capacity expansion, technology upgradation strengthening customer relationships and geographic diversification. Its overall capacity stands at 90mn garments p.a (Standalone 39mn + Atraco 40mn + Matrix 11mn). It has strong customer portfolio with international brands such as GAP, Carhartt, Columbia, JC Penny and Abercrombie & Fitch contributing 65-70% of the revenues. Overall, the company’s revenues, EBIDTA and PAT grew at CAGR of 15%, 39% and 79% over FY20-24. India’s improving positioning in global export markets, expanded capacity and acquisition of Atraco & Matrix would help revenues and PAT to grow at CAGR of 14% and 42% over FY25-27E (including acquisition of Atraco & Matrix).
• US reciprocal tariffs provides opportunity; capacity addition to continue: Higher reciprocal tariff rates on China, Vietnam and Bangladesh, makes India a cost competitive and stable supply option for US retailers in the coming years. Gokex is consistently invested in capacity expansion to remain competitive in the global markets and expand the customer list. It has recently added new unit at MP with a capacity of 3mn garments taking its overall capacity to 90mn garments. Gokex is planning to do a capex of Rs150crore p.a. over the next three years to expand capacity in key geographies. Capacity expansion has potential to add revenues of Rs300- 400crore per annum once new units attain certain maturity. Gokex wants to achieve asset turnover of 3-4x in the coming year.
• Acquisition of Atraco & Matrix – a strategic fit: The acquisitions of Atraco and Matrix is key from strategic growth initiatives expanding global footprints and product offerings. With Atraco, the company has gained a strong presence in Africa, unlocking duty-free access to markets such as US, mitigating from the risk of higher tariffs from US on India. Acquisition of Matrix boosted its position in the high-value knitwear segment, opening doors to new European and UK markets. With improved utilisation levels post integration, Atraco and Matrix together will add revenues of Rs1,465crore/Rs1,663crore and EBIDTA of Rs142crore/Rs184.3crore in FY26E and FY27E.
Rating and Target price
Revamped focus of top management, enhanced capacities, a better product mix along with acquisition of Atraco and Matrix will aid Gokex to strengthen its position in the key export markets. FTA with UK and reciprocal tariff by US can be a long-term opportunity to drive consistency in the performance. We recommend Buy on the stock assigning price target of Rs1,005.
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