Financial firm JM Financial lowers Gokaldas Exports' projected growth by 20% following Trump's tariff announcement - Is it a good time for investors to buy stocks at a discount?
Gokaldas Exports Navigates US Tariff Challenges with Stable Long-term Outlook
Gokaldas Exports, a leading Indian textile exporter, is facing near-term challenges due to increased tariffs on US shipments, but the company's strong financial performance and strategic moves are maintaining a stable long-term outlook.
In the first quarter of the financial year 2026 (FY26), Gokaldas reported a significant rise in net profit, up by 52.6-53% year-on-year, reaching approximately ₹41 crore. This growth was driven by tight cost controls and productivity improvements, with the EBITDA margin expanding significantly to 12.1% from 8.8% a year ago.
The company is currently facing a 25%-50% tariff hike on US shipments, leading to margin pressures given single-digit net profit margins and limited scope to absorb tariff increases. However, orders placed in advance are helping to mitigate short-term disruption, and future quarters may see tighter margins as a result.
In response to US tariff uncertainty, Gokaldas is putting on hold further capital expenditure decisions pending clarity, while actively expanding and seeking to diversify exports into the EU, UK, and African markets. This strategy is aligned with India's ongoing FTA negotiations with the EU, which management sees as a strong growth catalyst.
The company is also commissioning three new factories in Bhopal, Kolar, and Ranchi, and planning a brownfield expansion in Africa, indicating confidence in medium-term growth. Despite robust earnings growth, shares have declined over the past year, reflecting tariff concerns and geopolitical uncertainties.
JM Financial believes that in the long-term, sourcing diversification remains a key theme for global retailers, and India remains one of the top contenders. JM Financial still implies nearly 36% upside for the share price of Gokaldas Exports.
While margin pressure is expected in the second quarter due to a burden share of increased tariffs and a seasonally weak quarter, management expects margins to normalize by early FY27 once additional costs are passed on to consumers.
The ongoing FTA negotiations with the EU-27 and bilateral discussions with the US are in focus for Gokaldas Exports. A positive outcome on the US-India trade deal might abate the near-term impact and turn out to be a growth driver for the company.
In summary, Gokaldas Exports is navigating short-term challenges from US tariff hikes with strong operational performance and cost control while positioning for long-term growth through geographic diversification and leveraging expected EU FTA benefits. The overall outlook is stable to positive beyond FY26 as margins recover and new markets expand. The new price target for Gokaldas Exports is Rs 1,020 per share.
Stocks in the textile industry may see increased margin pressure from US tariffs, but strategic moves like geographic diversification and cost control by a company like Gokaldas Exports could potentially lead to long-term growth. The finance sector is closely monitoring the ongoing FTA negotiations between India and the EU-27, as well as US-India trade talks, as a positive outcome could be a growth driver for businesses in the industry. The investment community is observing the performance of companies like Gokaldas Exports and adjusting their portfolios accordingly, with some analysts like JM Financial implying a high upside for share prices. In the world of Defi and traditional finance, businesses need to adapt to shifting market dynamics and economic conditions to maintain a stable business outlook.
