Gokaldas Exports: impetus to volume growth

ANALYSTS' CORNER

Enam Securities rates Gokaldas Exports as an 'Outperformer', relative to the sector. Protectionist measures have been imposed on Chinese apparel exporters by the EU. There are expectations of similar measures from US as well.

This could provide further impetus to volume growth for Indian apparel exporters. The report feels that the current scenario has improved the pricing environment in certain restricted categories that would lead to margin expansion for Gokaldas Exports.

Order book position for the company for Autumn-Winter season stood at Rs 410 crore. Revenue growth of 20 per cent per annum is expected over the next two years. Margin pressure is likely to ease as pricing improves. EBITDA margin is expected to improve by 50 bps to 9.2 per cent in FY07E.

Buyer concentration continues to decline. Capex program is on schedule. Production lines are expected to go up from 270 to 320 by FY06E and eventually to 360 by FY07E. The stock trades at 17x FY06E earnings of Rs 30.9.

Gangotri: ramping up operations

Keynote Capital, initiating coverage on Gangotri Textiles, recommends a 'Buy'. The company plans to increase scale of operations and achieve forward integration and envisages expansion of yarn spinning and garment manufacturing facilities and setting up new weaving and processing capacities.

The proposed wind farm will enable the company to curtail its power costs as textiles is a power-intensive industry and normally power costs are the second largest cost, after raw materials.

The report expects margins to expand going forward, as a result of economies of scale and better product mix. The south-based company is a leading manufacturer of quality cotton yarn and has also made a foray into garments, with its Tibre brand of semi-formal trousers. The stock trades at 14.6x FY06E.

Opto Circuits: premium valuation IndiaInfoline, initiating coverage on Opto Circuits India, recommends a 'Buy'. It is an established player in a niche segment of medical electronic devices and medical monitoring products.

The report believes that the company commands a premium valuation due to its unique and high growth business model as well as inorganic growth opportunities from acquisitions. It is expected to witness a CAGR of 45.7 per cent over FY05-07.

The company's key product, SpO2 sensors, are used for checking the percentage of saturated oxygen in the blood and pulse rate. This division contributed 66 per cent to the total turnover in FY05. The global demand for this product is $528 million, of which US market size is 70 per cent.

The company has a market share of 2.5 per cent, which is estimated to reach five per cent over the next two years. It received US FDA approval for this product in FY05, which saw SpO2 sales rise by 58 per cent.

Further, the expiry of the patent owned by Tyco Nellcor has opened up a huge market for the company. The stock trades at a P/E of 20.8x FY06E and 15.2x FY07E.