Trident fundamental analysis: Can it become a multi-bagger?

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  • Post last modified:25/11/2021

This article provides an in-depth fundamental analysis of Trident, which is one of the biggest textile companies in India. In this article, we have Analyzed the business, financials, fundamentals, and stock performance of Trident.

This will help you evaluate is Trident better for investment. But before I proceed, please note that our analysis is only for educational purposes and not to provide stock tips. This article is to empower you with the right knowledge so that you can make an informed investment decision.

Trident fundamental analysis: Company profile

The flagship company of USD 1 billion Trident Group, Trident Limited is one of the world’s leading integrated home textiles manufacturers, and the largest wheat straw-based paper manufacturer. Headquartered in Ludhiana, Punjab. The company is also one of the largest exporters of home textile products.

Trident is the leading manufacturer of yarn, bath linen, bed linen, wheat straw-based paper, and chemicals. In the year 2016, the company also entered into the bed linen space by commissioning a facility in Budni, Madhya Pradesh. Trident has spread its footprint in over 150 countries worldwide.

Best stocks below rs 500 in India for long term.

Trident fundamental analysis: What Trident do?

Trident’s vertically integrated business encompasses the manufacturing of a wide variety of high-quality textile ( yarn, bath & bed linen ) and paper ( wheat straw-based) & chemicals from the world-class manufacturing facilities in Barnala, Punjab, and budhni, Madhya Pradesh.

Trident Geography-wise revenue distribution

Trident geography wise revenue distribution

Segment-wise revenue distribbution

Trident segment wise revenue distribution

Financial highlights in the past five years

Trident fundamental analysis

Trident business segments are the textile industry, paper industry, and chemicals. Now, let’s take a deep dive into understanding the business and growth opportunities of each segment.

68% of the revenues of Trident are from exports, so we are going to analyze both global and Indian industries.

Textile industry

84% of the revenues of Trident are from the textile industry.

Global textile industry

In the year 2020, the global textile industry is valued at a whopping USD 594 billion. Companies all over the world are recovering from the Covid-19 pandemic and started operations. The textile industry is expected to reach USD 654 billion in the year 2021, as the restrictions in most of the countries are lifted and back to a normal situation.

The textile industry is expected to grow at a CAGR of 6 percent and will reach USD 821 billion by 2025.

By seeing these statistics, we can clearly understand that there is a lot of growth opportunities for Trident.

Now, let’s take a look at the Indian textile industry.

Indian textile industry

The textile industry alone accounts for 12% of Indian exports, 7% of the nation’s total industry output, and 2.3% of the GDP. It also makes up 5% of the global trade in textiles and apparel.

After agriculture, the Indian textile industry is the second largest employer in India.

Indian textile industry is one of the oldest industries which is there for several centuries. After China, India is the second-largest producer and exporter of textiles, and the majority of the exports are to US and UK.

After China, Bangladesh, and Vietnam, India is the fourth-largest producer and exporter of apparel. Superior quality makes companies in India export leaders.

Indian governement support to textile industry

  • Lowered the GST slab to 5 percent.
  • Both national and international players are showing interest to invest in the textile industry. In the Indian textile industry, up to 100%, foreign direct investment is allowed through the direct route.
  • Between April 2020 and December 2020, foreign direct investment and equity inflows were stood at USD 3.7 billion.
  • The Indian government also introduced schemes to boost textile exports and set a target of USD 100 billion worth of exports in the next five years.
  • The schemes are the Technology degradation fund scheme and the scheme for integrated textile parks to attract investment in the textile industry.
  • Cabinet also approved a production-linked incentive scheme worth rupees 10,683 crores for the textile sector with an aim to boost domestic manufacturing and exports.
  • In budget 2021-22, the government of India also proposed a scheme for setting up mega-investment textile parks in the country to enable India’s textile industry to become globally competitive and to attract large investments.
  • National investment promotion and facilitation agency for information in India said that by 2024-25, India’s market share in Textile and apparel will reach 15% from 5%, which is three times, and exports by both textile and the apparel industry are expected to reach USD 300 billion.

Textile industry growth drivers

  • Adoption of modern technologies.
  • Superior capacity building.
  • Availability of low-cost skilled labor.
  • Growth of online fashion industry.
  • increasing penetration of organized retail.
  • Growing youth population and ubranization.
  • Support from governement with several schemes.

Paper industry

16% of the revenues of Trident are from the paper & chemicals industry.

Global paper industry

Just think about it, the use of plastic will definitely have a very bad impact on the environment. Already we are seeing a lot of climates and natural calamities in most of the countries, if we continue to damage nature, nature will definitely pay back it to us.

So, the only way we can get rid of plastic in most of the daily essential use like covers for packaging is through paper products.

For example use of paper covers, cups, plates, and packaging, etc.

So, in the future, the use of paper products will increase drastically as most companies and countries are moving towards plastic-free products

The global paper products industry is valued at a whopping USD 837 billion in the year 2020. At a 5% CAGR, the paper products industry is expected to grow to USD 885 billion in 2021, and by 2025 the paper products market is expected to reach USD 1080 billion with a 5% CAGR from 2020 to 2025.

In the global paper products market, the Asia-Pacific region accounts for 35% in 2020, with 26% North America stood at second place and Africa was the smallest region in the global paper products market.

Indian paper industry

The paper industry in India provides employment to over 5,00,00 people directly and 1.5 million indirectly.

The Indian government recently announced a ban on single-time use plastic products, so the companies will start using paper products instead of plastic.

15 million tons per annum is used for paper products in India, and it is expected to touch 23 million tons of paper consumption by 2025, which is a 7% increase per year.

The per capita consumption of paper in India is very low, which is just 14 kilograms per annum, the global average is 57 kilograms and in developed it is as high as 200 kilograms per annum.

In India, the domestic market size of paper products is 80,000 crore rupees and the exports market size of paper products is 6,800 crore rupees.

India is ranked 15th position as paper manufacturing nation in the world.

Paper industry growth drivers

  • The raise of E-commerce.
  • Demand for better quality pacakaging of FMCG products through organized retail.
  • Increasing preference for ready to eat foods.
  • Ban of use of plastic bags and pacakaging.
  • Demand for better quality paper in writing and printing segment.

Till now, you have learned about the Trident company profile, what Trident does, and understanding how the textile and paper business in both global and Indian markets and also the growth opportunities.

Trident’s business is mainly in textiles and paper business, Now let’s take a deep dive into understanding the business of Trident and how trident generates its revenue from the textile and paper industry, and how Trident positioned itself in the textile and paper industry.

In textiles, Trident is the leading manufacturer of yarn, bath & bed linen.

Trident fundamental analysis: Textile Business overview

Cotton yarn

Trident company is operating in this space for the past two decades and the company manufactures high-quality yarn for both the home textile segment and retail segment. Trident has the largest spinning installation at a single campus in India.

Trident cotton yarn product portfolio includes 22 different types of products and the company is looking to add more products pipeline with new launches in the future. 27% of the revenues of Trident are from the cotton yarn segment.

Bath linen

Bath and bed linens are the two main divisions of Trident and the majority of the revenues, which is more than 50% are from these two divisions. Trident is one of the largest players globally in the home textile space.

Trident is the largest player in terry towel capacity in the US, Trident holds the position of the largest supplier of bath linen.

Trident spends a lot of money on innovations and files new patents every now and then to improve the quality of its products and to take its quality to a whole new level.

Trident’s Bath linen product portfolio

  • Beach.
  • Spa & hotel.
  • Luxury.
  • Organic.
  • Designer.
  • Bath mats.
  • Waffle.
  • Infants & kids.
  • Bath rugs.
  • Dobby texture.
  • Checkered.
  • Luxury.

Bed linen

With a wide range of products portfolio and high-quality products with global standards. Trident is the complete bedding solutions provider with unmatched design capabilities when compared with its competitors.

In recent years the division has witnessed huge traction and increase in sales led by increasing exports.

Trident’s bed linen product portfolio

  • Solid/printed sheets.
  • pillow cases.
  • Top-up sheets.
  • Duvets.
  • Comforters.
  • Fitted sheets.
  • Decorative pillows.

Trident fundamental analysis: Risks

  • Raw materials cost: Trident mainly depends on cotton and wheat straw. The price of raw materials always fluctuates. Due to unavailability or limited availability will result in price fluctuations which will impact the Trident’s revenue and profit margins.
  • Currency risk: Trident’s majority of the reveues are from exports, having a strong international business, the company need to face the risk of currency fluctuations.
  • Competition risk: Low-cost imports due to favourite government polices in other countries may pose significant risk to business. For example, Indian government is increasing the taxes on imported goods from other countries, which will result in high cost for imported products and the domestic companies will take advantage of it. The government of India is doing this in order to encourage the companies to start manufacturing in India. Trident’s majority of the revenues are from exports, so if other countries starts increasing the taxes, it will have impact on Trident revenues and profits margin.

Brand showcase and product portfolio

The Trient brand and product showcase is designed to the aspirational desires and differentiated needs of consumers. The products are carved from the finest quality fibers. All the products adhere to and are certified for the best-in-class industry standards.

Trident fundamental analysis: Financials

ParticularsTrident
Marke cap20,613 Cr
Price to earnings
( P/E )
31.7
Price to book value
( P/B )
7.05
Price to sales
( P/S )
3.55
Price to cash flow
( P/CF )
34.8
PEG ratio5.00
Sales growth
( 5 years )
4.33%
Profit growth
( 5 years )
6.34%
ROE( 5 years )11.4%
ROCE( 5 years )10.3%
Debt to equity0.37

The market capitalization of Trident is 20,613 crore rupees, which is one of the biggest companies in the textile industry and one of the biggest companies in the bath & bed linen segment.

From the above table, Trident’s financials are average. But still, Trident is a good bet for long-term investment.

5 important financial ratios for beginners.

Price to earnings

Trident PE chart

The full form of PE is the price to earnings, if the PE of a company is 30 then an investor is paying 30rs for one rupee of company earnings.

In the case of Trident, the PE multiple is 31 which means an investor who is investing in Trident is paying 37 rupees for one rupee of company earnings.

Higher the PE, the higher the valuation of a company. The low value of PE is positive for a company.

if you are using PE ratio to compare two companies, do remember that use PE only when you are comparing companies within the same sector, but not companies within different sectors.

Price to book value

Trident PB chart

ROE

The five-year average ROE of Trident is 11.4%, which is not good. The ROE of its peer companies is significantly higher than Trident.

ROCE

The five-year average ROCE of Trident is 10.3%, which is lower than its competitors.

Trident fundamental analysis: profit & loss

ParticularsTrident ( FY 2020-21 )
Net sales4,519 Cr
Profit before tax445 Cr
Net profit345 Cr
EPS0.68

The net sales of Trident is 4,519 crore rupees, profits before tax is 445 crore rupees, net profit is 345 crore rupees and EPS is just 0.68.

Even in the time of covid, Trident performed well and declared decent numbers. The main reason for this is definitely e-retail and e-commerce.

Trident fundamental analysis: Balance sheet

ParticularsTrident ( FY 2020-21 ) Cr
Equity & liabilities
Share capital509.60
Total reserves2,806.95
Borrowings255.09
Other N/C liabilities345.89
Current liabilities1,836.63
Total liabilities5,754.16
Assets
Net block3,736.58
Capital WIP110.41
Intangible WIP7.16
Investments3.90
Loans & advances80.26
Other N/C assets2.69
Current assets1,813.16
Total assets5,754.16
All figures are in crores

How to read, analyze or understand a Balance sheet.

Trident cash flow statement

ParticularsTrident ( FY 2020-21 ) in Cr
Profit from operations445.15
Adjustments371.38
Changes in assets & liabilities-175.20
Tax paid-142.22
Operating cash flow499.11
Investing cash flow-148.98
Financing cash flow-570.04
Net cash flow-219.91
All figures are in Crores.

How to understand a cash flow statement.

Trident fundamental analysis: shareholding pattern

ShareholdersHolding %
Promoters73.02%
FII2.14%
DII0.93%
Public23.91%
Others0%

Trident stock performance

Trident fundamental analysis

Trident stock price has grown at a CAGR of 46.9% over the last five years, 87.1% over the last three years, and 416% for the last year. Trident stock has given huge returns for its investors and it will continue to give even in the future as well because the demand for textiles will rapidly increase in the future and the government is also taking a lot of steps in the textile industry and launching new schemes to support the textile industry to grow.

The government of India also set a target of USD 100 billion in textile exports by 2025.

Frequently asked questions

Is Trident a good company to invest?

Yes, Trident is a good company for long-term investment. It can even become a multi-bagger stock. It has already given huge returns for its investors in the last five years and will continue to give even in the future.

What is the future of Trident share?

The future is bright as the government of India is taking big steps towards textile industry growth and also set a target of USD 100 billion textile exports by 2025. Not only this the government also announced a PLI scheme worth 10,000 crore rupees to boost the textile industry. The government of India also announced a lot of other schemes for the textile industry, which will attract foreign investors to invest in the textile industry

Trident share price target 2025

Trident share price target for 2025 is 100 rupees. Trident may announce bonus shares once it reaches 100 rupees or close to 100. Trident already announced bonus shares when the share price reached 65 rupees to keep the price as low as possible so that retail investors will show interest to invest in Trident company. Trident has already given more than 400% returns for the last year.

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