Gokaldas Exports Battles Tariff Headwinds, Bets On Kenya, Europe For Growth, Says Systematix Maintaining Hold

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Systematix Report

We present key takeaways from our meeting with the senior management of Gokaldas Exports Ltd. Our discussions centered around the impact of US tariffs, the company’s mitigation strategies, and its long-term growth outlook.

Management indicated that ~55% of its revenue is directly exposed to US tariffs. The company is engaging with its customers to share the financial impact of the 25% penal tariff. The company might have to absorb 15%-18% of this cost, with the customer bearing the remainder. This discount will result in a negative margin of approximately 4-6% on the impacted 55% of the business (based on a normal margin of 12%).

To protect customer relationships and order book visibility, the company is absorbing this burden, which could weigh on near-term margins. The balance 45% of revenue remains unaffected.

Kenya operations are scaling with incremental capacities coming onstream in H2 FY26. Management expects the business to deliver ~20% RoCE in a year, on higher profitability aided by dutyfree US access, better labour availability, and faster ramp-up. Part of the Indian order book is also being shifted to Kenya to mitigate the tariff headwinds.

Europe revenue has doubled, albeit on a low base, and management is looking to double growth over the next two years. The company is also focusing on product diversification, particularly synthetics, where it sees strong long-term potential.

It is exploring subcontracting and asset-light models to add flexibility, while expecting to raise prices by 10-15% from Spring 2026 onwards. We have cut FY26E Ebitda margin by 200bps to factor in the near term margin squeeze from higher tariffs, resulting in 22%/40% cut in Ebitda/PAT.

FY27E numbers are retained, as we expect the penal tariff to be rescinded before end CY25, with some part of the reciprocal tariff likely passed on to the end customer by way of price increases. Maintain Hold with an unchanged target price of Rs 812, based on 25x FY27E earnings (unchanged).

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