This Small-cap Apparel Manufacturer Stock Rises 1266.2% In 3-Years, Gets A Buy From Sharekhan

Sharekhan has recommended the stock of Gokaldas Exports with a target price of Rs 635. The stock price of this company has risen by nearly 1266.2% over three years and rallied by 28.1% in one year to close at Rs 485 per share.

Gokaldas Exports was incorporated in 1995. It is the largest exporter of garments and home textiles in India. The company has a strong presence in the US, Europe, and Asia. It has a diversified product portfolio and a strong brand name. Recently the company posted its results showing strong growth and brand presence.

Based on the quarterly numbers the brokerage firm has said that the company is well-positioned to benefit from the growth in the global apparel market. Sharekhan has said that the company is likely to benefit from the following factors:

Growth in the global apparel market: The global apparel market is expected to grow at a CAGR of 5% in the next five years. This growth will be driven by rising incomes and changing lifestyles in emerging markets.

Strong presence in the US market: The US is the largest market for Gokaldas Exports. The company has a strong presence in the US market and is well-positioned to benefit from the growth in the US apparel market.

Diversified product portfolio: Gokaldas Exports has a diversified product portfolio. This diversification helps the company to reduce its risk and to benefit from different trends in the apparel market.

Strong brand name: Gokaldas Exports has a strong brand name in the apparel industry. This brand name helps the company to attract customers and to command premium prices for its products.

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Sharekhan said, "We initiate coverage on Gokaldas Exports (GKEL) with a Buy assigning a target price of Rs 635. The stock trades at 18x/14x its FY24E/FY25E earnings."

The stock broking firm believes that the investment in capacity expansion, a better product mix, and sustained client additions will help the company post double-digit earnings growth (PBT CAGR at 20% over FY23-25E) riding on favourable industry tailwinds in the medium to long run.

Further, it added, that the company's capex of ~Rs. 370 crore over FY22-24E is expected to generate revenues of Rs. 1,100-1,300 crore (asset turnover at ~3.0-3.5x). EBITDA margins would consistently improve in the coming years. The company is likely to generate cumulative FCF of close to Rs. 180 crores over the next two years; RoCE will stand high at ~24% versus 22.5% in FY23.

Disclaimer

The stock has been picked from the brokerage reports of Sharekhan. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.