Most leading textile companies including Trident faced severe headwind in FY18 due to hike in raw material price, delayed recovery from GST and currency volatility. Trident’s FY18 standalone sales were stagnant with year-on-year sales dropping 7% in Q4FY18. Apart from the muted performance in the home textile business, realisations were flat even in the paper and chemical division. With the company logging weak numbers, the stock lost 46% to hit Rs.56 from its all-time high of Rs.104 in October last year.
Trident’s Q1FY19 was lacklustre with revenue declining 3% year-on-year to Rs.11.31 billion due to 5.3% de-growth in textiles business, while paper and chemicals business grew by 2%. Ebitda declined 21% but bed linen segment grew by 47% and domestic volume also rose 43% while realisation increased 15%. Utilisation increased from 44% in Q4FY18 to 55% in 1QFY19 and management expects utilisation to remain at similar levels in FY19 and reach 75% by FY21.
In what can be perceived as a vote of confidence post the June quarter results, promoter Rajinder Gupta has just bought 1.85 million shares worth Rs 110 million from the open market. The purchase through holding company Trident Group follows Gupta’s acquisition of 71,000 shares worth Rs.4 million though Trident Corp in June. Over the past two years, the promoters have bought shares worth Rs.500 million, increasing their overall stake from 66.49% in June 2016 to 67.78% in June 2018.
When the promoter himself is bullish, analysts are seldom behind. Motilal Oswal Securities has maintained its revenue and profit CAGR estimate of 7% and 24% respectively over the next two years. Axis Securities, too, is banking on volume growth to lead to higher realisation. “Deliberate de-stocking undertaken by US retailers is coming to an end as confirmed by volume growth in both product segments over last 2 quarters. As the operational efficiencies improve, the company would be in better position to improve its realization,” states their latest update.
Despite being around for two decades as a leading home textiles player, Trident hasn’t really caught the fancy of FIIs. Their miniscule holding has further trimmed from 1.50% in Dec 2017 to 1.26% in June 2018. While some mutual funds have been fairly active, their stake, too, has decreased from 0.74% to 0.56% in the same period. As the stock raced towards its all-time high in September last year, Edelweiss MF exited selling 484,288 shares. Tata MF followed suit in March 2018 but Franklin Templeton MF and IDBI MF continue to hold 1.7 million and 380,728 shares, respectively. At its current price of Rs.65, the stock trades at 10x its FY19 estimated earnings.