Recommendation From Textile Sectors

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Trident Ltd.
SPINNING THE YARN OF PROFITABLE GROWTH

HERE IS WHY
Very positive quarterly financials
Good growth prospects in the sector
Long term consistency in financial performance

Trident Ltd is engaged in the manufacture of yarn, bath linen, bed linen, wheat straw-based paper, chemicals and captive power. With a strong client base in around 100 countries, the company has expanded its presence in the home textiles segment to around 450 retail outlets across India. Its product portfolio includes solid/printed sheets, top-up sheets, duvets, comforters, fitted sheets, pillow cases, etc. It owns a captive power plant to cater to its business segments.

The standalone quarterly financial performance reports an increase in revenue from operations to Rs.1,391.50 crore in Q2FY19 from Rs.1,131.19 crore in Q1FY19, posting a growth of 23.01 per cent. Its EBITDA increased to Rs.261.084 crore in Q2FY19 from Rs.195.509 crore in Q1FY19, marking a growth of 33.54 per cent. The net profit increased to Rs.109.14 crore in Q2FY19 in comparison to Rs.59.22 crore in Q1FY19, registering an increase of 84.29 per cent. The EPS increased to Rs.2.14 in Q2FY19 from Rs.1.16 in Q1FY19. The net profit margin (NPM) surged to 7.84 per cent in Q2FY19 from 5.23 per cent in Q1FY19. The consolidated annual financials report a dip in revenue to Rs.4,569.88 crore in FY18 from Rs.4,674.59 crore in FY17, posting a fall of 2.23 per cent. Its EBITDA declined to Rs.819.24 crore in FY18 from Rs.885.49 crore in FY17, decreasing by 7.48 per cent. The profit for the year dropped to Rs.264.03 crore in FY18 from Rs.337.22 crore in FY17, posting a drop of 21.70 per cent. 



In FY18, bed and bath linen contributed 48 per cent of Trident’s revenue, while yarn and paper contributed 34 per cent and 19 per cent, respectively. Trident’s utilisation levels for towels, bed linen, paper and yarn manufacturing capacities stand at 45 per cent, 44 per cent, 89 per cent and 95 per cent, respectively. The geographical revenue from bed and bath linen segment constituted 87 per cent and 13 per cent from India and the rest of the world, respectively.

To lower its vulnerability to increase in raw material prices, the company has in place a superior inventory management system to store raw materials. It employs hedging measures to protect itself from currency risk, which is crucial considering its vast global footprint. The company is benefiting from the depreciation in the Indian rupee, increased yarn consumption and greater paper realisations. Its business strategy focuses on developing value-added products, expanding customer base and cost optimisation. Additionally, the company has capitalised on government schemes such as 'Make In India' and policies promoting exports. Trident’s debt-equity ratio improved to 0.9x in FY17-18 on account of repayment as well as partial prepayment of high-cost debt. The company’s cash position has improved to Rs.48 crore as on March 31, 2018 from Rs.27.8 crore as on March 31, 2017. Although its annual performance shows a dip in numbers, its quarterly performance is positive and proffers a promising outlook on the company’s future prospects. The stock is trading at 1.1 times its book value. The company has showcased consistent profit growth of 40.28 per cent over the last five years and has maintained a healthy dividend payout of 23.53 per cent. By virtue of these factors, we recommend our readerinvestors to BUY this stock.



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