Buy Gokaldas Exports with a target of Rs 800: Citigroup

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Buy Gokaldas Exports with a target of Rs 800: Citigroup

Broking house, Citigroup Global Markets is bullish on Gokaldas Exports and has recommended buy rating on the stock with a target price of Rs 800.

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Gokaldas Export BSE | NSE 31/05/12 Are Mutual Funds betting on Gokaldas Export?

Broking house, Citigroup Global Markets is bullish on Gokaldas Exports and has recommended buy rating on the stock with a target price of Rs 800.

Citigroup Global Markets report on Gokaldas Exports:

Buy: Best Proxy to Garment Outsourcing, Reiterate Buy/Medium Risk

"Gokaldas' large capacities, wide product range and close ties with global brands make it poised for growth. We think it offers the best proxy to the garment outsourcing theme; our target of Rs.800 implies 33% upside."

Growth catalysts

"1) Growing order books in exports, orders worth Rs.2.6bn in hand for 3Q07; 2) focus on diversifying customer base; 3) expansions
going on-stream to accelerate export growth; and 4) any relaxation on labor laws would enhance growth potential."

Enriching product mix further

"Plans to enter the structured suits market for men and women (suits fetch higher prices and superior margins) - setting up a new facility in Bangalore by Dec'06. This apart, exploring export opportunities in new products like 1) industrial work-wear 2) innerwear and sleepwear products and 3) garments made from technical textiles."

Expansions progressing at fast pace

"Started operations at Chennai SEZ plant in Oct'06, production to ramp up by 4Q. Expects to expand capacity by 30% at two plants in Bangalore, commission suits facility and new plant in Mysore by Apr'07 - this will increase capacity by 15% yoy to 30mn pieces p.a. Capex of Rs.1.2bn over the next two years will be funded by internal accruals and existing IPO funds."

Valuations to appreciate

"Stock is trading at 11.2x Sept'07E P/E, with global reforms favoring India, company's healthy earnings CAGR of 22% over FY06-09E, superior ROCEs vs. sector and stock likely to offer better liquidity given recent announcement of 1:2 split, we expect valuations to appreciate."