Gokaldas exports is in the business of garment exports and is one of the larger players in the business of garment exports within the country. The company is poised to take advantage of the post quota regime and has already shown a strong growth of 33% YOY revenue in Fiscal 2005. The company has some big names as its customers, which include Nike, GAP, Tommy Hilfiger and Fitch.
The company has a wide range of products, which include jackets, skiwear, denim and formal trousers. The company derives 83% of its sales from what is known as outerwear (jackets etc) and bottom wear (trousers etc.)
It also has in house facilities for labels, tags, elastics and cords and other activities like embroidery, laundry and printing.
Expansion Plans
The company has 43 factories and has recently taken out an IPO to set up further factories and modernize the existing ones. This plan is unfolding well as it has got orders worth Rs.400 crore this fiscal already which is half the annual turnover last year. This bodes well for the company, which has seen its profitability declining this fiscal. This is because in the post quota regime there has been a pricing pressure and the profit percentage of revenues has gone down a bit. The stock has also responded by going down from the 600 levels on back of the profitability declining. So going forward growth in revenues seems to be how the profits will increase. To this extent the capex that the company has planned will put it in a good position to take on the competition and increase market share.
Risks facing the business
One of the major risks facing the business is that the top 10 customers contribute more than 80% of the revenues. Therefore the company is highly dependent on them and even if one were to shy away from the company it will be a major hit.
Other threat would be dependence on the dollar for more than 95% of the revenues and the dollar recently has tended to weaken a bit against the rupee and therefore can drag down profitability.
Conclusion
All in all declines in the stock should be used to build up positions as this is the only listed company which is into garment exports in a big way and is there to take advantage of the post quota regime. A P/E or around 15 is a decent value for the stocks.
