MOSL: Trident (Buy) - Steady amidst turmoil - Paper business drives profitability

Trident: Steady amidst turmoil; Paper business drives profitability; bed linen on steady growth trajectory

(TRID IN, Mkt Cap USD0.5b, CMP INR63, TP INR83, 32% Upside, Buy)

• Steady operating performance; forex loss limits PAT: TRID’s revenue fell 6.1% YoY to INR11,850m in 4QFY18 due to a reduction in duty drawback, currency impact, and a volumes decline in the bath linen segment. EBITDA margin expanded 160bp YoY to 18.3% due to an 80bp decline in raw material cost to 50.9% of net sales and a 120bp decline in employee expense to 10.8% of net sales. Other expenses, however, stood higher at 20% of net sales (v/s 19.6% in 4QFY17). EBITDA grew 3% YoY to INR2,168m. Adj. PAT declined 49% YoY to INR509m, as other income came in at -INR29m on account of foreign exchange loss of ~INR100m. Tax rate, too, was higher at 42.2% v/s 22.7% in 4QFY17. Textiles segment declined 8% YoY to INR9,661m, while Paper & Chemicals segment fell 3% YoY to INR2,190m. EBIT margin contracted 490bp YoY to 6.7% in Textiles, but expanded 500bp YoY to 27.5% in Paper & Chemicals.
• FY18 performance: Overall revenue fell 1.5% YoY to INR45,575m, as major US retailers were in a destocking mode, resulting in subdued volume off-take. EBITDA fell 7% YoY to INR8,192m, with the margin down 110bp to 18%. Thus, adj. PAT declined 21.8% to INR2,628m.