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Growth momentum continues; order book visibility improves

Revenue in-line; EBITDA/PAT below estimates

* Trident (TRID) reported a strong performance on the back of demand revival in the Home Textiles and Paper segments. The demand trend in Home Textiles is expected to continue in the upcoming quarters as well, led by order book visibility for the next six months. However, demand revival in the Paper segment has been impacted by the second COVID wave. Recovery is expected in the coming quarters as offices and educational institutions start to open up.

* Although the performance was below our estimates, we maintain our earnings estimates for FY22/FY23 on an improving demand outlook. Maintain Buy.

Bath and Bed Linen revenue up 52% and 109% YoY, respectively

* TRID reported standalone revenue of INR13.5b (est. INR13.8b), up 36% YoY. EBITDA margins expanded 330bp to 16.8% on operating leverage. EBITDA margins expanded despite gross margin contraction of 155bp to 54.1%. 4Q EBITDA, adjusted for forex gains, was up 69% YoY to INR2.3b (est. INR2.6b). Consequently, adj. PAT grew 3.4x YoY to INR976m. On a QoQ basis, revenue/PAT grew 5%/3%, whereas EBITDA declined 4%.

* FY21 consolidated revenue/EBITDA de-grew 4%/2%, whereas adj PAT grew 3% YoY. The company generated CFO of INR5b in FY21 v/s INR12.1b last year; higher inventory and trade receivables led to lower CFO.

* Textiles revenue was up 46% YoY (+2% QoQ) to INR11.3b, with EBIT margins expanding 700bp YoY (-300bp QoQ) to 9.8% (after forex adj). Capacity utilization in 4QFY21 in Bath and Bed Linen stood at 61% (v/s 62% in 3QFY21) and 92% (v/s 101% in 3QFY21), respectively. On a QoQ basis, overall segmental revenue grew 2%, while EBIT declined 21%.

* Paper and Chemicals revenue grew 2% YoY (+20% QoQ) to INR2.2b, with the EBIT margin expanding 80bp YoY (+650bp QoQ) to 27.8%. Capacity utilization in the Paper segment stood at 92% (v/s 87% in 3QFY21). On a QoQ basis, overall segmental revenue/EBIT was up 20%/56%.

Highlights from press release

* Net debt stood at INR14.2b as of Mar’21 v/s INR16.1b as of Mar’20.

* The Home Textiles segment has sustained the demand momentum in the current quarter, with Bath and Bed Linen segments posting revenue growth of 52% and 109% YoY, respectively. Exports had a robust 64% contribution to the total revenue for the quarter.

* The yarn project has been proposed at a total cost of INR11.4b, with the implementation happening under three phases. However, the company has decided to go ahead with the implementation of a single phase only, which is near completion; it would review the capex in due course, in line with the strategic plan to achieve ‘Vision 2025’.

Valuation and view

* Work-from-home in most of the big cities across the world has contributed to the demand revival of home textile products – with people spending more on home improvement products, as homes have been converted into primary workplaces. Demand revival has been further supported by government stimulus, with the consumer focus largely on health and hygiene.

* TRID saw strong demand for Home Textiles in 4QFY21, and the trend is expected to continue in FY22, driven by strong demand from global retailers; the company has order book visibility for the next six months.

* Although the performance was below our estimates, we maintain our earnings estimates for FY22/FY23 on an improving demand outlook.

* We value the company at 14x FY23E EPS and arrive at TP of INR18.4. Maintain Buy.

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