Gokaldas Export gains from tariff tailwinds, Africa growth and capacity expansion

Investment View

Motilal Oswal Financial Services reiterated its Buy rating on Gokaldas Export following a strong first-quarter FY27 performance. The broker views the company’s diversified customer portfolio and multi-country manufacturing model as competitive advantages.

The investment case is supported by broad-based growth across India and Africa, improving tariff competitiveness for Indian sourcing, capacity expansion, and the prospect of higher utilisation and a better product mix lifting profitability.

First-Quarter FY27 Performance

Gokaldas Export reported consolidated revenue growth of 20.7% year-on-year to Rs 11.5 billion in first-quarter FY27. Revenue was 9% above Motilal Oswal’s estimate, while gross profit was 11% above estimate.

India business revenue rose 17.8% year-on-year to Rs 7.5 billion, outperforming the approximately 12% decline in Indian apparel exports cited by management. Growth was driven by increasing inquiries across shirts, bottoms, denims and other product categories, as customers from Europe and the US rebalance sourcing towards India.

The second-quarter order book was largely booked, while third-quarter and fourth-quarter order placements were progressing. This provides visibility for the second half of FY27.

Africa Growth and Capacity Expansion

Africa was the fastest-growing geography, with revenue increasing 44% year-on-year. Management retained an aspirational FY27 Africa revenue target of USD 120 million, although current visibility stood at USD 112–115 million.

Existing African capacity could support approximately USD 120 million of revenue, with additional upside available through second-shift utilisation without significant capital expenditure. However, continuation of the African Growth and Opportunity Act, or AGOA, remains a central risk to the Africa growth thesis. Management believes an extension is likely and noted that customers were booking orders beyond December.

Gokaldas Export is ramping capacities in Bhopal, Karnataka and Ranchi. Bhopal Phase 2 is expected to approach full utilisation by fourth-quarter FY27. The planned addition of around 3,000 machines, primarily in lower-cost regions, could generate Rs 1.75–2.0 billion of revenue per 1,000 machines at steady state.

The new Jharkhand and Karnataka facilities involve total investment of around Rs 1 billion and could generate approximately Rs 3.5 billion of revenue at steady state, with a meaningful contribution from FY29.

BTPL Integration and Profitability Outlook

BTPL generated Rs 1.7 billion of revenue in first-quarter FY27 but recorded an EBITDA loss of approximately 7.5–8%. Management expects BTPL to reach a mid-to-high single-digit EBITDA margin by fourth-quarter FY27 as utilisation and product mix improve. BTPL was expected to merge in the third quarter.

First-quarter gross margin expanded 130 basis points year-on-year to 52.4% despite higher raw-material costs. EBITDA rose 15.6% year-on-year to Rs 1.1 billion, although EBITDA margin declined 40 basis points to 9.8% and was 4% below Motilal Oswal’s estimate.

Wage, transport, fuel, chemical, synthetic-fabric and freight costs weighed on margins. India wage costs increased by approximately Rs 200 million during the quarter. Management expects efficiencies, operating leverage, automation, rupee depreciation, higher utilisation and a better product mix to offset these pressures.

Approximately 70% of dollar exposure was hedged at around Rs 89 per US dollar in first-quarter FY27, delaying the full benefit of rupee depreciation. Management raised FY27 revenue-growth guidance to above 15% and guided for an EBITDA margin above 10%.

Broker Estimates and Valuation

Motilal Oswal expects consolidated EBITDA margin to improve by approximately 215 basis points over FY26–28E, exceeding 10% through higher utilisation. Its estimates are as follows:

The broker increased FY27E and FY28E revenue estimates by 1.5% and 3.5%, respectively, and EPS estimates by 1.2% and 3.3%. Its Rs 1,110 target price is based on 14 times FY28E EV/EBITDA.

Key Risks

• Tariff and US-exposure risk.
• Raw-material and other cost pressures.
• Project execution risk related to capacity expansion.
• Customer concentration risk.
• Risk to the Africa growth thesis if AGOA is not continued.