Buy Gokaldas Exports; target of Rs 291: Prabhudas Lilladher

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Buy Gokaldas Exports; target of Rs 291: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Gokaldas Exports and has recommended a buy rating on the stock with a target price of Rs 291.

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Prabhudas Lilladher is bullish on Gokaldas Exports  and has recommended a buy rating on the stock with a target price of Rs 291.

Prabhudas Lilladher report on Gokaldas Exports: 

Result Snapshot:

Gokaldas Exports (GEL) reported revenues and profits of Rs 2,766 million and Rs 182 million up by 26.1% and 15.5% YoY and 8.3% and 1.8% sequentially. OPM jumped from 11.0% last year and 11.4% in Q3FY07 to 13.3%, the highest recorded in the last eight quarter primarily due to change in product mix. For FY07 GEL reported revenues and profits of Rs 10,344 million and Rs 703 million higher by 17.0% and 15.6% YoY respectively. OPM also improved from 10.9%last year to 11.6% this year. The management has guided topline growth of15% in spite of the rupee appreciation. Domestic business is expected to witness robust growth over the next two years on back of the retail boom. Based on the revised earnings estimates of Rs 24.3 and Rs 31.0, the stock is trading at PER of 9.1x and 7.1x FY08E and FY09E respectively. We maintain our BUY rating on the stock given the attractive valuations and set a 12-month price target of Rs 291 (12.0x FY08E EPS) giving an upward return of 32%.

Financials & Valuations:

During FY07, revenues and profits grew by 17.0% and profits by 15.6% to Rs 10,344 million and Rs 703 million respectively. OPM also improved by 70 bps to 11.6%. Going forward, we expect the company to grow revenues and profits at a2 year CAGR of 17.2% and 23.2% to Rs 14,220 million and Rs 1,066 million. As on March 31st, the company has a working capital loan of Rs 2.67 billion of which Rs 2.1 billionn is for working capital. Post results we have revised our revenue and profit estimates for both FY08E and FY09E downwards. The same is due to rupee appreciation as well as higher tax rate. As against our previous revenue estimates of Rs 12,211 million and Rs 14,654 million, our estimates are lower by 1.3% and 3.0% respectively to Rs 12,051 million and Rs 14,220 million. Profit estimates are also lower by 11.8% and 11.2% to Rs 835 and Rs 1,066 million. Based on the revised earnings estimates of Rs 24.3 and Rs 31.0, the stock is trading at PER of 9.1x and 7.1xFY08E and FY09E respectively. In spite of the downward revision in estimates, we maintain our BUY rating on the stock given the attractive valuations. We set a 12-month price target of Rs 291 (12.0x FY08E EPS) giving an upward return of 32%.