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Trident Analysis - What is management's comments on the company?

06 June 2022

Trident Group in an exchange filing today (June 6, 2022) stated about the industry and its earnings outlook. The company is the leading manufacturer of yarn, paper and stationery, home textiles like bed linen and bath linen, chemicals and captive power. 

While the textile industry had a setback in the past two years with the outbreak of the Covid-19 pandemic, the industry is overcoming the same with assistance from multiple Government incentives. The demand for the industry has also made a strong comeback with economies reopening globally. While the high cotton prices in recent times is a dampener resulting in lesser output, especially in the recent quarter, Trident Group is confident about the industry’s prospects as well as the company’s. 

Here is what’s in store for the coming going ahead.

Short-term challenges lay ahead

In its recent March quarter, Trident had reported a good set of numbers with revenue growth of 39% y-o-y to Rs 1869.9 crore. Its profit registered a growth of about 90% y-o-y to Rs 234.7 crore during the same period (adjusted for exceptional items). 

But the revenue declined about 6% on a quarterly basis, the high input costs took a toll on the company’s margin as well. On a quarterly basis, it was about 18% (though on a yearly basis it increased). 

  • Considering the market conditions, as per the company’s statement, the next two quarters might be challenging for the industry and as such for the company. 
  • The short-term challenges could have an impact on the earnings of the company. Factors include volatile cotton prices, rise in input costs, demand slowdown, competition and continuing geopolitical tensions. 

Outlook for Trident 

Trident, as per its statement, mentioned that its margins were affected due to high input costs in both the textile and paper business. The company has undertaken negotiations with customers for price increases to minimize impact. It had also taken cost reduction measures for sustainable margins. 

As per the management, the company has taken a few initiatives to protect its margins. These include expansion to new and innovative products and capacity expansion, catering to luxury, fashion, and sports segments for higher profitability, moving gradually towards higher retail price points products and exploring hedging strategy for cotton at the exchange. 

Capex plans

Trident also has plans to increase capacity utilization of its plants through digitization of processes. 

Among a few, the company has plans to set up an additional spinning project to enhance the capacity of yar with a cost of about Rs 5540 million. And debottlenecking of sheeting plant by 70,000 meters/day in capacity at Budhni with a project cost of Rs 4680 million. 

And how does it plan on raising capital for the same? Through debt and equity components, the statement said. 

As of Q4FY22, the company’s debt to equity ratio is at 0.34 times. 

In the past 5 years, the stock has delivered over 450% returns to its shareholders. 

The stock now trades at a 28 times price to earnings ratio. 

About Trident Group 

Trident is one of the leading players in the textile industry both domestically and globally. It derives most of its revenue from exports (68%) and the balance comes from the domestic market. 

It operates in textiles which account for 86% of its revenue and the paper and chemicals segment which generates about 14% of revenue as of FY22. 

The company has a presence in about 150 countries with a strong clientele base across countries. 

To read the RA disclaimer, please click here
Research Analyst: Bavadharini KS

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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