Fundamental Result Update

Gokaldas Exports result Update



Gokaldas Exports reported Result below than our estimates. The revenue came 3% YoY growth to INR241cr and 34.9% QoQ decline. However, the revenue came 6.3% than our estimate. The reason for dismal top-line growth was on the account of production loss due to extended plant shutdown (¬6 weeks). The second lockdown in Karnataka was worse than the first lockdown, which majorly affected the operations as the company was running at 46% CU. The orders which the company could not executed got deferred in Q2FY22. Moreover, any orders which does not get fructify, demands penalty from the customers. Hence, GEL has not bid for any new orders as it does not have the enough capacity to facilitate the orders.



Valuation & Outlook: Management is confident of delivering high revenues INR1500cr for FY22E with improving margins every year. We opine that GEL will be able to sustain growth over the next couple of years with its manufacturing track record & diversified customer base and capabilities. Further, we believe that on the back of enhanced scale and cost optimization measures, the EBITDA margin will improve over the next two years. We had initiated coverage on the stock at INR120 (19th May 2021) and the stock has hit a high of INR226 on (17th July 2021), a return of 88.3%. Given a strong visibility of revenue growth, margin improvement, increased profitability and return ratio profile, we continue to maintain BUY with a TP of INR252 (12x PE on FY23E), 25% upside.

 


Tags: FundamentalResult Update


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