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Raw mat. cost inflation hurts profitability

Trident reported consol. EBITDA of INR3.4bn, in line with JMfe. Revenue from Textiles dipped sequentially by 8% while paper and chemicals reported an increase of 10%. Consolidated EBITDA margins came in lower QoQ at 17.7% vs 3QFY22 margin of 19.3%, impacted primarily due to surge in raw material cost. The Paper segment continues to show signs of steady progress with the opening of offices and educational institutes. Net debt decreased from c. INR14.8bn (3QFY22 end) to c. INR13bn as on 4QFY22 end. The company has also embarked on an ambitious capex plan to achieve its ‘VISION 2025’. Inflation in commodity prices is likely to impact profitability going forward. Consequently, we downward revise our earnings/fair value. However, the long term structural story remains intact. Structural drivers like increased market share in the US, US ban on Xinjiang imports, duty reimbursement by GOI and market share gain on China+1 theme are likely to drive earnings trajectory going forward. Maintain BUY with revised target price of INR46/sh (refer exhi. 3/4).

Raw material inflation impacts margins: Revenue from Textiles registered a decrease of 8% QoQ (+39% YoY) to INR15.7b, with EBIT margin contracting by 130bps QoQ (+490bps YoY) to 15.5%. Textile EBIT declined 15% QoQ to INR2.4bn. Capacity utilization in bath and bed linen stood at 46% in 4QFY22 (v/s 69% in 3QFY22) and 81% (v/s 100% in 3QFY22) respectively. Revenue from Paper and Chemicals increased 10% QoQ (27% YoY) to INR2.8bn. EBIT margin contracted by 160bps QoQ (-640bps YoY) to 21%. Paper EBIT marginally increased by 2% QoQ to INR594mn. Capacity utilization in the Paper segment stood at 89% (v/s 90% in 3QFY22). Revenue de-grew 6% QoQ to INR18.5bn (est. INR17.5bn). EBITDA margin contracted 160bps to 17.7%.

Ambitious Capex plan ahead: The Company plans to add a Spinning project with capacity of ~1 lac proposed spindles at Budhni to enhance the capacity of yarn and an open end spinning project with ~3600 proposed rotors is also expected with project cost of INR5.5bn and INR1.8bn respectively. The company also plans to set up a power plant project of 16.3 Megawatt at Budhni and undertake debottlenecking of sheeting plant by 70,000 meters/day with project cost of INR1.8bn and INR4.7bn respectively. Net debt decreased marginally to c. INR13bn from c. INR14.8bn as on 3QFY22 end.

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