Trident

Ambitious capex to drive future performance

15 November 2022

Trident reported consol. EBITDA of INR1.4bn, significantly below JMfe of 2.0bn. Revenue from
Textiles dipped sequentially by 19.8% QoQ while paper and chemicals reported an increase of 5.7%
QoQ. Consolidated EBITDA margins came in lower QoQ at 9.9% vs 1QFY23 margin of 15.6%,
impacted primarily due to higher raw material cost. Trident announced a capex plan worth INR8.9bn
during the quarter in addition to the earlier announced capex of INR13.8bn. The company continues
to remain well placed as structural drivers of increased market share in the US, US ban on Xinjiang
imports, duty reimbursement by GOI and market share gain on China+1 theme are likely to drive
earnings going forward. Further, FTAs with UK/EU over time could likely increase the addressable
market size, boding well for the company. Near term demand environment for textile segment is
expected to remain muted given recessionary fears and inventory pile up at retailer levels.
Consequently, we downward revise our earnings/fair value. Maintain BUY (refer exhi. 3/4).

• Raw material inflation impacts margins: Revenue from Textiles registered a decrease of
19.8% QoQ (-23.4% YoY) to INR10.8b. Textile segment reported an EBIT loss of INR196bn as
against an EBIT of INR1.3bn in 1QFY23. Capacity utilization in bath and bed linen stood at
44% in 2QFY23 (v/s 44% in 1QFY23) and 50% (v/s 71% in 1QFY23) respectively. Revenue
from Paper and Chemicals increased 5.7% QoQ (+33.6% YoY) to INR3.4bn. EBIT margin
expanded by 440bps QoQ (760bps YoY) to 31%. Paper EBIT increased by 22.9% QoQ to
INR1.1bn. Capacity utilization in the Paper segment stood at 86% (v/s 91% in 1QFY23).
Consol. revenue de-grew 14.4% QoQ to INR14.4bn (est. INR15.1bn). EBITDA margin
contracted 570bps to 9.9%.
• Restructuring of board to empower professional management: Trident previously
announced restructuring of Company’s Board to empower professional management amidst
decision of Mr Rajinder Gupta (Founder and Chairman) to step down due to health issues
and family commitments. The company appointed five professional managing directors to
enhance empowerment, drive strategy and catapult growth of each of the business
segments. Further, the board appointed Mr. Rajinder Gupta as ‘Chairman Emeritus’ of the
Company.
• Ambitious Capex plan: The Company announced a capex plan worth INR8.9bn towards ~1 lac
proposed spindles (INR5.4bn), 42 looms for bath linen (INR2.5bn) and 215 ktpa of chemical
capacity (INR1bn). This capex is in addition to the earlier announced capex of INR13.8bn, for
which projects are under different stages of implementation with commercial production
expected by September’23.