Research Reports On Trident Ltd By IDBI Capital, Ventura Securities, CRISIL, HDFC Sec & Dynamic Levels
|Research Reports On Trident Ltd By IDBI Capital, Ventura Securities, CRISIL, HDFC Sec & Dynamic Levels|
|Brokerage:||CRISIL, Dynamic Levels, HDFC Sec, IDBI Capital, Ventura|
|Date of report:||February 27, 2017|
|Type of Report:||Initiating Coverage, Result Update, Sector Report|
Structural shift in India’s competitive position; India gaining share in US home textiles market
|Full Report:||Click here to download the file in pdf format|
|Tags:||CRISIL, Dynamic Levels, HDFC Sec, IDBI Capital, Trident Ltd, Ventura|
Research report on Home Textile Industry by IDBI Capital
IDBI Capital’s report makes the following salient points:
• Indian home textile companies are in a sweet spot currently with potential to increase sales in the export market. Over the last five years, there have been structural shifts in the dynamics of the industry where Indian companies have gained advantage over their Chinese counterparts.
• Indian companies have become increasingly competitive in the textile exports markets due to 1) availability of raw material (cotton) at lower costs compared to China, Pakistan who are net importers, 2) labour cost advantage over China, and 3) rupee depreciation of ~20% against the yuan during the last five years.
• Moreover, Indian companies continue to benefit from supportive government policies with assistance such as TUFS loans, capital subsidy, tax breaks, etc.
• Looking ahead, we expect Indian companies to continue to gain market share in the terry towel and cotton sheet markets in the US; also they remain well poised to penetrate other geographies such as Japan, Middle East and Australia.
Buy recommendation of Trident Ltd by IDBI Capital
IDBI Capital has given the following investment logic:
“Incorporated in 1990 by a first generation entrepreneur Mr. Rajinder Gupta, Trident is one of the largest integrated home textile producers in the world. It also manufactures wheat straw-based paper. During FY14-16, Trident expanded capacity in both towels and sheets with backward integration in yarn manufacturing.
With current utilization levels under 50% for terry towel and 30% for bed linen, the company remains wellpoised to capture market share in home textile export markets.
We expect Trident’s revenues/EBITDA/ net profit to grow at a CAGR of 15.5% /19.6%/34.5%, respectively over FY16-19E. ROEs and ROCEs are expected to expand to 19.7% and 17.2% in FY18E, respectively, from 14.2% and 10.7% in FY16. With rising sales of terry towel and bed linen and no major capex plans in the near future, we expect free cash flows to be utilized towards deleveraging balance sheet and paying dividends. On a valuation front, the stock is currently trading at a PE of 8.5x on its FY18E earnings. We assign a PE multiple of 12.0x to our FY18 EPS estimate of Rs8.2 and derive a target price of Rs98, translating in a 41% upside to the current market price”.
Buy recommendation of Trident Ltd by Ventura Securities
“We are optimistic about the company’s prospects given that:
• Globally the retail value of home textiles is expected to reach USD 117.10 billion by 2018 (CAGR of 2.4%) with Asia Pacific growing at a much faster CAGR of 8%.
• The Indian home textile industry is expected to expand at a CAGR of 8.3% during 2014–21 to USD8.2 billion in 2021 (from USD4.7 billion in 2014) on the back of increasing spending on premium products, higher per capita income and increasing brand awareness.”
Buy recommendation by CRISIL
CRISIL has stated that Trident has a valuation grade of 5/5 which means that the CMP has “strong upside”. CRISIL has predicted a target price of Rs. 93.
Buy recommendation of HDFC Sec
“The home textile business growth (out of the capex incurred over FY14-FY16) combined with steady contributions from the paper and yarn segments will lead to a healthy revenue and profit growth over FY16-FY19. The benefits of increasing scale of operations, highly integrated manufacturing process in both home textiles and paper, and continued access to low-cost raw material for paper division will ensure healthy and sustained operating profitability in the medium term.
Trident’s financial risk profile will improve significantly over the medium term given the absence of major debt-funded capital expenditure (capex), progressive retirement of debt and improvement in liquidity. Its credit rating was revised upwards by CARE and CRISIL in Oct 2016 to ‘A’.”
Buy recommendation of Dynamic Levels
Dynamic Levels have recommended a buy with an increased target price of Rs. 80.