Buy Gokaldas Exports; target of Rs 865: Sharekhan

Sharekhan's research report on Gokaldas Exports

Gokaldas Exports (GKEL) has acquired Atraco, an apparel manufacturer having a scale of business equivalent to 40% of GKEL’s existing business. Peak revenue potential of ~Rs. . 4000 crore by FY2025 post consolidation. Acquisition value of $55 million is valued at 0.6x EV/Sales and 7.6x P/E, which is at discount to GKEL and close textile peers with equivalent scale of operations (production capacity of 40 million garments p.a.). Funding of acquisition will be done through mix of debt and internal accruals. Acquisition is expected to earnings accretive from year one of the consolidation (likely to add Rs. 5-6 per share in FY2025E based on rough-cut calculations).

Outlook

The stock has moved up by ~20% on August 29 with the acquisition enhancing scale to explore more opportunities in key export markets. The stock currently trades at 27.6x/20.6x its FY2024E/25E earnings. We maintain our Buy rating with revised PT of Rs. 865.

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