DSIJ Mindshare

Recommendation From Textile Sector

TIME TO WEAVE PROFITS

HERE IS WHY
Strong financials 
Company’s debt reduction strategy
Robust segment mix

Trident manufactures bed sheets, towels, cotton yarn and paper. The export of home textiles recorded improvement due to shift in demand from China to India. China has started focusing on high-end textile products and therefore has started importing yarn.

This has resulted in higher demand for Indian cotton yarn and home textiles. The company has presence in both cotton yarn and home textiles and it was able to add three clients and expand its reach to UK, Italy, France, Japan, and Australia during the September quarter.

Trident has been certified with the prestigious ‘Egyptian Gold Seal’. Trident has achieved capacity utilisation of 92 per cent for yarn, 49 per cent for bath linen and 29 per cent for bed linen in 9MFY17. The company’s paper segment’s capacity utilisation stood at 90 per cent in 9MFY17. 

On the financial front, Trident’s revenue increased 26.36 per cent to Rs.3450 crore in 9MFY17, as compared to the same period in the previous financial year. The company’s EBITDA too rose 28.29 per cent to Rs.703 crore in 9MFY17 on a yearly basis.

Its EBITDA margin expanded by 31 basis points to 20.37 per cent in 9MFY17, as compared to the same period in the previous fiscal year. Trident’s net profit also rose 35.6 per cent to Rs.237 crore in 9MFY17 on a yearly basis. Its net profit margin expanded by 47 basis points to 6.87 per cent in 9MFY17, as compared to the same period in the previous financial year. On the segmental revenue front, Trident has earned 48 per cent from bed and bath linen, 34 per cent from yarn and 19 per cent from paper in 9MFY17. 

The company’s bed and bath segment contribute 86 per cent of exports and the remaining 14 per cent is domestic revenue. Its yarn segment contributes 29 per cent from exports and the remaining 71 per cent comes from domestic sales. Trident’s paper segment exports contribute 9 per cent towards revenue and the balance 91 per cent is domestic revenue.

Trident has successfully grown its topline by a CAGR of 6.13 per cent during the last five financial years. The company’s EBITDA also rose by a CAGR of 18.33 per cent in FY12-FY16. It has posted net loss of Rs.43.74 crore in FY12, thereafter it has grown its profitability and posted net profit of Rs.229 crore in FY16. Trident’s ROE and ROCE stood at 14.36 per cent and 8.99 per cent in FY16.

The company has been able to cut down debt by Rs.665 crore in 9MFY17 which stood at Rs.2608 crore at the end of 9MFY17. Its net debt-to-equity ratio stood at 1.4x in 9MFY17 and interest coverage ratio of 8.45x indicating its appetite for repayment for loans. On the valuation front, the share price of Trident is trading at trailing 12-month PE of 15.95x as compared to industry peers such as DCM (35.81x), while the industry trades at a PE of 12.69x. It has given dividend yield of 1.26 per cent to its shareholders

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