Gokaldas Exports extends rally, up 8% in two days post June quarter results

Shares of Gokaldas Exports surged 7 per cent to Rs 384.40 on the BSE in Monday’s intraday trade, gaining 8 per cent in past two trading sessions after the company reported resilient performance in June quarter (Q1FY23), despite a challenging macro-economic business environment. Despite near term headwinds, the management anticipate good growth in FY23 and a surge from FY24.

The stock of garments & apparels manufacturer has recovered 20 per cent from its recent low of Rs 315.90 on July 13, 2022. In the past one month, the stock has gained 5.5 per cent as against 5.6 per cent rise in the S&P BSE Sensex. Earlier, the stock had corrected 38 per cent from its record high level of Rs 520 touched on May 18, 2022.

In Q1FY23, Gokdaldas Exports revenue grew 4 per cent quarter on quarter (QoQ) (up 153 per cent YoY) to Rs 610.6 crore.  EBITDA (earnings before interest, taxes, depreciation and amortization) margins declined by 130 bps QoQ to 11.8 per cent (up 439 bps YoY). Increase in minimum wages effective this quarter, increased labour cost by Rs 4.3 Cr. Though this had an impact of 0.7 per cent on the margin, it was offset by business volume and productivity, the company said. It has reported profit after tax (PAT) of Rs 39.4 crore in Q1FY23, against a loss of Rs 2.6 crore in Q3FY22. It had posted PAT of Rs 60.9 crore in March quarter (Q4FY22).

The solid revenue and profit growth were driven by excellence in execution and optimal utilization of capacity. Seasonally H1 is relatively weak for the Indian apparel industry, as during this period brands tend to source synthetic apparel for Autumn/Winter, while India is more strongly rooted in the cotton fibre ecosystem which caters largely to Spring/Summer demand, the management said.

The recent development in the macro-economic factors signals that key textile commodities like Cotton and Crude oil have started to decline (by 20 per cent from the recent high) easing price pressure on the textile value chain. Further, there is evidence of decongestion of the supply chain. Freight costs also may continue to decline if oil price falls, the company said.

On the outlook, Gokdaldas Exports said the company see headwinds in the near term and strong tailwinds supporting the ongoing growth of the business. Large brands are wary of slower consumer off take in the seasons ahead, till inflationary trends persist. They are also battling higher levels of inventory from last year. It is expected that this may impact imports in the short run, it added.

Simultaneously, several opportunities are presenting themselves in the form of continuing shift of global sourcing away from China, supplier consolidation towards efficient and well –capitalized players, supply side instabilities in countries like Sri Lanka, Pakistan and Myanmar, favourable currency, announcement of PLI and signing of FTAs with key markets, the company said.