I am tracking and analyzing this Potential Textile Company from the last 8 quarters and now finally thought today to share this thought of a Buy proposal on Trident Ltd with an estimated long term target of Rs 100 from FY23 point of view. Currently, the Stock Price of the Company is Trading around Rs 5. So it means it can turnaround into a 100 Bagger Stock.
Trident Group is a diversified group of businesses headquartered in Ludhiana, Punjab (India). The group currently operates in five business domains: Yarn, Bed Linen, Paper, Chemicals, and Captive Power. The Trident Group has its strong customer base in more than 100 countries across 6 continents in the world.
From a modest yarn producer to the world’s biggest incorporated home material (bed and shower cloth) maker, with around 13% piece of the pie in worldwide towel exports to the United States and a 32% portion of Indian towel exports to the United States, and with marquee customers like H&M, Ralph Lauren, Walmart, Ikea, Macy’s, Taj Hotels, Hyatt Regency, Sheraton, Page Industries, Raymond, Bombay Dyeing, Radisson Hotels, and the many more renowned brands,
The organization appeared to be a promising long term bet. Particularly in light of the fact that it was at a key expression point with major Capex behind the organization and debt to equity ratio slowly coming down. What further offered comfort was diversified product mix, with exposure to profitable paper and chemical segment.
From FY17 to FY20, there have been significant disturbances on the large scale front, be it local or worldwide (trade wars). The Textile industry extraordinarily has been very volatile and unpredictable.
The company’s sales and operating profits have risen over the last two years, although at a rate lower than our assumed forecasted levels. This was on account of negative growth in FY18 for Trident due to a change in the inventory policy and major destocking by the clients and uneven vendor procurement cycles in the textile domain.
In the main portion of FY20 (independent premise), Trident has revealed a topline development of 4%. Be that as it may, the operating profit margins have extended from 18.1% to 20.8%, with operating profit developing by 18% YoY. Further, lower depreciation expense and the effective tax rate have prompted 54.6% YoY development in the bottom line.
According to our overhauled projections until FY23, we expect the top line of the organization to develop at a compound yearly development rate (CAGR) of 8.1% (FY19-FY22E). A large portion of the development is relied upon to originate from higher uses in the Textile fragment (towel and bath linen).
On the rear of higher capacity utilization and backward integration, we expect operating profit margins to improve by 164 basis points (1.6%), from 19.4% in FY19 to 21% in FY22. The net profit for the organization, with better operating performance and with lower tax rates, is relied upon to develop at a CAGR of 20% (FY19-FY22E).
We expect the tax-adjusted return for capital to be at 13% toward the finish of FY22 while return on total assets is normal at 18%. The normal debt to equity throughout the following three years is normal at 0.7 times. The organization has been delivering profits since the most recent six years with normal paying dividends of 23%.
Because of our evaluations, we had forecasted Target Price of the company to earnings multiples of 15 times (versus 5-year median P/E multiple of 14 times) for valuing the company.
We are suggesting this stock to buy from a long term perspective. Trident Ltd’s revenues for the quarter stood at Rs 11.4 billion, down 12.9% YoY. Lower volumes in the yarn segment and decline in realizations in the paper impacted the topline. The operating profit for the quarter was down 21% YoY, with margin at 16.8% versus 18.5% in 3QFY19. The net profit for the quarter was down 64% due to onetime reversal of MEIS (merchandise export from India scheme) hit of Rs 532 million. Excluding this item (adjusting for tax), the bottom line degrowth would have been limited to 10.4% YoY.
For 9MFY20, revenue stood at Rs 38 billion, down 1.5% YoY. Overall textile sales (~81% of revenues) for 9MFY20 reported flattish growth, however, bath linen sales (~56% of revenue) were up 11.7% YoY. Paper segment sales for this period declined 2% YoY. The operating profit grew 5.9% YoY, with margin at 20.4% versus 19.8% in 9MFY19.
EBIT Margin in the textile and paper segment stood at 8.8% (versus 7.9% in 9MFY19) and 35.5% respectively (versus 37.2% in 9MFY19).The net profit growth (including exceptional losses) stood at 8.6% YoY, with a net profit margin of 8.1%. The net debt to equity at the end of December 2019 stands at 0.5 times. While the long-term debt has come down from Rs 12.9 billion to Rs 10.4 billion, it was slightly offset by an increase in the working capital requirement due to the procurement of cotton. The interest coverage ratio stood at over 9 times.
The company has announced an interim dividend of Rs 0.18 per share. The management has reiterated the focus on expanding market presence and higher utilization of the capacities. For nine months, the capacity utilization in the towel, bed linen, and yarn segment stood at 52%, 59%, and 95% respectively. In the Paper segment, the utilization levels stood at 88%.
Trident Group has recently unveiled a variety of quality products across plenty of categories keeping in mind the necessities of medical workers & demand of the consumer’s post Coronavirus Pandemic.
Trident New Products List:-
- Medical Textiles range like Bodysuits, Hazmat Suit, Face Mask and Hospital Curtains.
- Health & Hygiene range including Antibacterial/ antimicrobial Bed Sheets, Odour neutralizing sheets, Natural dyed fabric for sensitive skin.
- Babycare range including Antibacterial feather touch towel, naturally soft and skincare sheets.
- Upholstery range including shower curtain and window curtains for hotels and households.
- Summer blankets for travelers being lightweight and easy to carry.
- The medical stationery range containing unique technology to guard against bacteria, fungus & molds.
The Group has been receiving lots of bulk orders in the past with the above product list from respected government offices and International Buyers.