Up 300% in 2 years! ICICI Securities sees over 50% upside in this multibagger stock

Shares of Bengaluru-based garment exporter Gokaldas Exports have delivered over 300 per cent return to its shareholders in the last two years.

ICICI Securities has initiated its coverage on this multibagger stock with a 'Buy' rating and target price of Rs 560, suggesting an upside potential of 51 per cent.

The stock ended at Rs 369.8 on BSE on January 10, 2023. It is down over 40 per cent from its 52-week high of Rs 519.5, hit on May 18, 2022.

According to ICICI Securities, Gokaldas Exports, under its new management (since FY18), has witnessed significant changes including marquee client additions, a richer product mix, higher margins, etc., leading to robust shareholder returns.

It believes, India – with its stable economy, abundant cotton availability, cheaper labour vs China and control over covid – is well placed to wrest a chunk of apparel market share from China and other competitive economies. Hence, India’s textile and apparel industry stands to benefit in the medium term.

Further, the brokerage firm said that the government of India’s (GoI) signing of FTAs with various countries (UK FTA likely in H1CY23) and incentive schemes is likely to boost the domestic textile ecosystem and catalyse further growth.

"Gokaldas, in the next leg of its growth, is executing a capex of Rs 3.7 billion over FY22-FY25, which includes new greenfield projects and upgrading its existing machinery. This will help: a) diversify its revenue sources (foray into knitwear), and b) potentially boost the topline by Rs 8 billion- 9 billion over FY23-25E," ICICI Securities added.

"We estimate EBITDA margin to expand by 100bps on the back of operating leverage benefits and adjusted PAT to register ~18% CAGR over FY22-FY25E. Key risks include input cost inflation, logistic bottlenecks and geopolitical tensions," it said.