MOSL: TRIDENT (Buy)-Muted performance across segments
Trident: Muted performance across segments
(TRID IN, Mkt Cap USD0.5b, CMP INR66, TP INR76, 15% Upside, Buy)
Miss on all fronts: 2QFY20 revenue declined 5% YoY to INR13.2b (v/s est. INR14.3b). EBITDA margin contracted 370bp YoY to 18.9% (v/s est. 22.2%). EBITDA adjusted for forex gain was down 21% YoY to INR2.5b (v/s est. INR3.2b). Adj. PAT declined 9% YoY to INR1.35b (v/s est. INR1.33b).
- Bath/Bed linen sales volume increases sequentially: 2QFY20 was muted for the company, as each segment delivered revenue decline and margin contraction. Utilization for bed-linen came in at 62% for 2QFY20 v/s 63% in FY19. For bath-linen, utilization was 56% in 1HFY20 v/s 49% in FY19. Sales volumes were up 20% QoQ for the bed-linen segment and up 7% QoQ for the bath-linen segment in 2QFY20. In paper segment, revenue declined 8% YoY, which also translated to margin contraction of 80bp YoY to 36.5%.
- Valuation and view: TRID has undertaken various initiatives for the US market to sustain/increase volume growth across the bath and bed-linen segment; additionally, company is targeting key top-10 US retailers. We have broadly maintained our estimates; we expect revenue/adj. PAT CAGR of 4%/14% over FY19-21 and value the stock at 7x FY21E EPS to arrive at a TP of INR76 (+15% upside). Maintain Buy.
Trident Limited is a terry towel, yarn and wheat straw-based paper manufacturer. The Company's segments include Textiles, Paper and Chemical/Chemicals, and Others. The Company's geographical segments include USA and Rest of the world. The Textiles segment includes yarn, towel, bed sheets and dyed yarn manufacturing (including utility service). The Paper and Chemical/Chemicals segment includes paper and sulfuric acid (including utility service). The Others segment includes sale of software and related services. The Company's product portfolio includes solid bath ensembles, beach towels, embroidered towels, bath mats, bathrobes, printed bed linen, duvets, duvet covers, cushion covers, viscose blended yarn, core spun yarn, bamboo/cotton yarn, dyed bed linen set, micro modal/cotton blended yarn, drawing paper, and Bible and offset print paper. Its brands include Trident Spectra, Trident My Choice and Trident Natural. It has manufacturing facilities in Punjab and Madhya Pradesh.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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