TRIDENT - World’s Largest Integrated Textile Manufacturer

(nikhilv) #45

Thanks for this - today it was trading around 76 and I have again started seeing value from level below this.Reason being market cap now is far below the annual sales , Reduction in debt happening continuously as planned by management (most need to go in depth rather than just looking at debt - like the low interest they are paying on debt and all…as it comes under TUFS), economy has pickup up relatively, their focus on both better margin product and also last con call update gave us an idea that they are setting up new sales team in Europe.All in all I see value.

I would like to welcome views on technical part - I am not a chart reader - so views welcomed there but most importantly equity capital is 500 crore - that also raises the free float to a greater extent and then we have the demand issues (which should not bother long term investor ) but its a point to be noted.

Views welcomed - invested form lower level - looking for levels to add mroe

(Aditya Mehta) #46

(JJoy) #47

Trident is currently available at good valuations, Current price is Rs 75 only. As per the latest CRISIL report they reconsidering a fair price on Rs 93, Latest investor presentation is available at Investor presentation and the latest quarter results are available at Result Looks a good buy at this price company is consistently reducing debt. Plenty of free capacity is available after the expansion and this will be utilised going forward. Also from the financial results the profits are increasing. Overall looking good.


(JJoy) #49

Annual report 2016 - 2017, a whole lot of information. Annual Report Stock price now at 100

(nipunmohta) #50

I bought shares of Trident on 16th of May and there was a final dividend declared on 25th May and an interim dividend declared on 23rd August. I have received the one declared on 23rd of August but not the one declared on 25th May. As per ET I’m eligible to receive the same and shows the same on my transaction page. Contacted the broker and they said that they have not received the dividend and will check with the company. Meanwhile I wanted to inquire if anybody who owns Trident shares can confirm if same is the case with them or have they received the final dividend.

(Vijay) #51

25th May Declared dividend is final one which is subject to approval of shareholders in the AGM.
It will be paid after AGM.

(nipunmohta) #52

Thank you! I read on BSE website the same is on 23rd September 2017.

EDIT : Dividend still not received. Has anybody else received it?

(Arnab) #53

I have been reading and re-reading the recent reports from Motilal Oswal and Edelweiss on Trident.

It took me almost a week to get some perspective out of all the data and estimates that were shared in them. I believe that is because I am a total novice in this (this is only the second company ever on which I have done any sort of serious research). Being from non-commerce background doesn’t do any favour either. But hopefully I will get better in future.

From what I understood, this particular company is a complete utilization play we have in our hand here.

They have just completed their massive expansion plan and their capacity in the bath linen (terry towel etc) segment is the highest among industry peers (25% greater than their closest peer Welspun) and their facilities in both bath and bed linen have full vertical integration.

According to the reports, the expansions were done by the management in order to make the company ‘future ready’, as the home textile market is expected to grow at a good pace in the next few years both globally and in the domestic arena.

However, I thought that having capacity is one thing, but utilizing it is a different thing altogether and that’s where I am concerned about, because their current utilization is around 45% (before the capex it was 74%).

I guess this is where experience comes into play.

Maybe someone who has seen utilization plays like these in the years past play out would have been in a much better position to judge the potential here than I am.

But one thing which I clearly understood is that, to increase the utilization the company will need to expand their client base and acquire more orders.

Maybe they can do that, maybe not. I guess that’s what we are betting for here.

However, I learned that in FY18 so far Trident has already acquired 10 clients which includes large replenishment clients like IKEA and Amazon. So that is a good news.

I have been also reading about the management and it looked to me that the board has a good lot of people and they are pretty open with the shareholders about their plans etc as well.

Also there are a lot of small pointers here and there in those reports which suggested that the management is fairly reliable.

Now about valuation, Edelweiss has mentioned that they have started coverage from Rs. 85 and in a recent report from CRISIL the fair value is mentioned as Rs. 93 and in the Motilal Oswal report they are saying that the fair value is around 90, taking 8x of FY19E PE. In another website I saw it is Rs. 104.

So looks like the fair value is between Rs. 85-95. Unfortunately I have to rely on these because I am not someone who can do DCF etc and the CMP is 100, so it’s slightly overvalued per se at the moment.

This is pretty strange as well, in a market like we have today, a stock is available near it’s fair value. Dont know how that happened.

At the moment my conviction about the stock is at best medium and since the valuation is ‘reasonable’ (if the reports are to be believed), 5% is what I am planning to invest in it (I am following the capital allocation framework suggested by Donald Francis in the forum). I have currently invested 1%, waiting for the price to come down.

Disc - As mentioned I have invested a small amount mainly for tracking purpose. So maybe my views are biased

(Aditya Mehta) #54

(pla7yer) #55

CRISIL has always been a positive view and had maintained a higher Vair value for Trident
I am not sure whether market has not realised it’s potential or we are missing anything here or CRISIL is over optimistic about Trident ?!

(Aditya Mehta) #56

Actually there are many positive triggers for the business itself.

  1. Reduction of debt
  2. Huge underutilized Capacity ,although it will take time to ramp up.
  3. Strong customer base.
  4. Margins yet to reach pre-expansion levels.
  5. Domestic market yet to be explored.

Comparison with peers shows that its still somewhat undervalued and have got potential to grow.

(Mridul) #57

My notes from Q3 concall

Due to uneven procurement cycle and destocking by some of large US customers, the industry saw volumes pressure in Q2, which continued in Q3 as well. Stronger rupee and higher raw material prices due to unavailability of quality cotton continue to remain key headwinds for the Textile Industry.

Bed and bath

  • Have been able to sustain our realization in Bed & Bath Linen business and we sense that de-stocking is a temporary phenomenon and hope to see volume growth in coming quarters (as US consumer demand is in tact).

  • For FY19 we have already given the utilization guidance for our bed linen segment (50-60%) for the entire year; for towel, we expect double-digit kind of volume growth.

  • If towel volumes are not good, we have the flexibility to sell more yarn outside.

  • We are offsetting the degrowth by having a better volume in our yarn business so that is a kind of flexibility we have in terms of our textile within the segments. So as soon as the towel utilization improve, our captive consumption (which is currently ~33%) will improve and that will have a better margin on maybe on an overall sales basis, the growth will be there. In terms of volumes, we will get a better margin.

  • Bath Linen 9Maverage Capacity Utilization stood at 45% and Bed Linen capacity utilization over 9M period stood at 42%. We foresee that volume should be back in the ongoing quarter and will be able to clock about 50%capacity utilization in both Bath & Bed Linen.

  • 945 crores / 15.3% EBITDA.

  • Bed linen segment is now EBITDA break-even. Bed linen at full utilization can do 1000 Cr.

  • We had achieved a highest utilization of 54% in towel business in Q4FY2017. It was ~51% in Q1 and now in Q2 and Q3 is the major impact when the utilizations came down to 42%, 43%.

  • Towel has degrown ~11% in this qtr yoy, while sheeting has registered ~62% volume growth. Towel realization was ~3% higher and sheeting realization was ~20% higher. This 20% higher realization is sheeting is due to moving from greige to processing.

Domestic Home Textile

  • Has seen more than 47% revenue growth yoy over 9M period compared to 9M FY 17. We will emerge not only as a leading global player in Bed and Bath Linen segment but will also capitalize on the growing opportunities in domestic market. This currently forms 7-9% of the overall business.


  • Arrival of Cotton this season was decent and price was down ~15% compared to last season. But due to quality issues the cotton prices started going up during December and currently the price is almost up 10% from bottom.

  • 9M average capacity utilization stood at 95%. No capex planned as of now.


  • Revenue (223cr) remained flat Y-o-Y despite 7% increase in sales volume majorly due to change in product mix. Copier paper sales for 9M stood 48% vis-à-vis 52% for FY17. 9M average capacity utilization stood at 89%.

  • EBITDA Margin stood at 39%. 36% to 40% margin is sustainable.

  • Wheat straw is the basic raw material; H1 is the season for this RM (cheaper) and H2 is off season (costlier).


  • During the 9MFY18, Long Term Debt have been reduced by 385 Cr to 1663 Cr; Interest Cost has been reduced ~17% in 9MFY18 to INR 90.5 Cr.

  • Ahead of this schedule in terms of our debt repayment.

  • Planning to pay back debt of 400-450cr next year.

Cotton Woes -

  • Focusing the revenue is the target and because of the cotton inventory which we stored in recent past that is fairly well covered to next three four months so we will be able to see growth in coming quarters, for next quarter at least there is a bit concern in terms of additional cost in the cotton.

  • Usually have about four to six months kind of cotton inventory at March end.

  • Last year (FY17) the average procurement price of cotton during the season was around Rs.120-125 per kg. So when this new season started FY18, it has came down to around Rs.105-108 per kg and from that point of onwards the cotton inventories have started building up in Q3 and now the price of cotton again touched to at around Rs.120-125 per kg. Due to quality constraints, the prices have again moved up in January. They keep incremental inventories, so despite prices rising, their cost for q4 will be lower than that of the market. Though, q3 over Q4, cost be be little higher.

Maintenance capex (per year)

  • 100cr for next 2 years each

Fund raising

  • This is an enabling resolution. No plans on the table as of now.

Impact of Forex fluctuation

  • At an approximate product value of Rs.500, it adds something like Rs.20-25 per kg kind of a product sale price, but see that is temporary. Whether that rupee appreciates or depreciates, it has an impact only for a quarter or two. At the end of that when your normal lead cycle is over either you have to pass on the benefit or you have to take the cost addition from the customers.


  • With improved utilization, and all fixed costs accounted for, EBITDA margins will improve quickly. At 60%, EBITDA will move up by 2%.

  • Overall EBITDA margins will on sustainable basis be ~18%-22%.

My take
Trident mgmt is guiding for minimum 18% EBITDA margin (where they are right now). Play is on improved utilization, reducing debt, good dividend yield. Cotton is an issue (due to which q2 was pretty bad), but mgmt said q4 will be better (as lot of hike will be passed through). Paper segment is providing stability (q4 will be better than q3). With US client restocking, utilization should improve for both bath and bed. Domestic textile is growing well and will grow for years to come at a very rapid rate. Indian textile is still competitive in USA vis a vis China and Pakistan. A very decent low risk bet at 70 levels in my opinion.

(pla7yer) #58

Thanks for the detailed analysis @Mridul

(Aditya Mehta) #59

Has there been any official announcement or news on this expansion by the company?

(Mridul) #60

Proposed vision to be a 20k cr rev company by 2025! They in last concall said they don’t have plans for any capex as the new plant is still operating at 40% capacity. Suddenly they have come up (proposed) with plans for 7200cr capex…bull mkt promoters? Already have 2.6k cr debt which i believe should be reduced significantly before going for any capex.

I think these guys have an eye on topline rather than bottomline. Want to raise as much money as possible till the market is good. I hope these plans are not immediate in nature.

(manan1379) #61

completely agree with u… any expansion shud b taken only after dey are able to increase utilisation to 85% or so

(Dhaliwal) #62

I would request comments from forum members on very high Depreciation for Trident. I have compared it to other companies in the sector (both textile and paper) and I find it really high compared to peers.

It is surprising to see almost 50% of operating profit going to depreciation. Can anyone explain this please?

(Rushikesh Kanthamani) #63

That might be because of their low capacity utilization of around 35% and going forward that ratio will improve as capacity utilization picks up. Nothing to worry as such.

(Dhaliwal) #64

still, it has remained high even for the last few years. I am wondering why Trident remained low on capacity utilization and the surprising thing is company’s plan for capex.

from screener, last 10 years data

Operating Profit 149.72 150.37 133.66 108.66 356.64 397.78 300.08 555.37 727.61 660.62 730.13 888.55 816.19
Depreciation 61.40 79.92 86.38 115.93 174.44 194.68 207.53 261.44 268.41 321.32 336.62 412.41 406.85

There is something seriously wrong with the management’s strategy.

They want to increase capacity further as the recent press release indicates. Some members on this forum have expressed their concern about that as well.