Shares of Gokaldas Exports zoomed on January 11 after ICICI Securities started coverage on the stock with a big potential upside, saying the capex will diversify revenue sources and upgrade existing assets leading to a bigger market share.
At 3 pm, the stock was trading 3 percent up at Rs 380 on the BSE.
ICICI Securities has pegged the stock price at Rs 560 in 12 months, a potential upside of 76 percent from the last closing price.
Gokaldas, in the next leg of its growth, is executing a capex of Rs 370 crore over FY22-FY25, which includes new greenfield projects and upgrading its existing machinery. The expenditure will enable the company to service larger export orders and upgrade its designing capabilities, it said.
“This will help: a) diversify its revenue sources (foray into knitwear), and b) potentially boost the topline by Rs 800-900 crore over FY23-25. We estimate EBITDA margin to expand by 100 bps on the back of operating leverage benefits and adjusted PAT to register 18 percent CAGR over FY22-FY25,” said Harsh Mittal at ICICI Securities.
The bulk (Rs 160 crore) of the capex is allotted towards setting up of new capacities and projects. The company plans to enter the knitwear segment with its integrated knit fabric processing unit in Tamil Nadu at a capex of Rs 130 crore.
ICICI Securities’ expects Gokaldas to generate operating cash flows of Rs 600 crore over FY23-FY25, which will allow the company to fund its capex through internal accruals.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.