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Sales recovery in sight; valuation pricey

* Trident (TRID) operates a vertically integrated business model with key product segments of yarn (27% of sales), home textiles (48% of revenue), and paper (16% of revenue), and exports to 100+ countries. It has a large manufacturing base comprising ~7.9 lakh spindles and 1,100+ looms in India, enabling in-house production across the value chain.

* Home textile portfolio, which comprises bath & bed linen, delivered a low-singledigit decline over FY22-26; however, we expect a 16% CAGR over FY26-28, driven by lower tariffs.

* Yarn sales remained flat over FY22-26 due to volatility in cotton prices, and we expect a 6% CAGR over FY26-28 with ~80-100bp margin improvement. The paper segment clocked a 2% CAGR over FY22-26 due to higher paper imports, and we expect a 7% CAGR over FY26-28.

* We model a revenue, EBITDA, and PAT CAGR of 11%, 17%, and 29%, respectively, over FY26-28, fueled by growth in home textile business, followed by the yarn and paper portfolios.

* We initiate coverage on TRID with a Neutral rating and a TP of INR28, valuing the stock at 12x FY28E EV/EBITDA, as we believe higher valuation and lower growth reflect limited opportunity.

Fully integrated player – capturing entire value chain

TRID operates a vertically integrated business model across yarn (27% of sales), home textiles (48% of revenue), and paper (16% of revenue), with exports to 100+ countries. It has a large manufacturing base comprising ~7.9 lakh spindles and 1,100+ looms in India, enabling in-house production across the value chain and supporting scale efficiencies. Home textile portfolio, which comprises bath & bed linen, delivered a low-single-digit decline over FY22-26; however, we expect a healthy 16% CAGR over FY26-28E, driven by lower tariffs. Yarn sales remained flat over FY22-26 due to volatility in cotton prices, and we expect a ~6% CAGR over FY26-28 with 80-100bp margin improvement. The paper segment (15% of sales) has a product mix of ~60% copier paper and 40% noncopier paper. This segment clocked a 2% CAGR over FY22-26 due to higher paper imports, and we expect a 7% CAGR over FY26-28.

Home textiles to drive mid-teens growth led by bed linen

The home textile portfolio, comprising bath and bed linen, remains TRID’s key growth and margin driver owing to higher value addition, customization, and branding opportunities compared to the commodity yarn business. The bath linen business, contributing 33% of revenue, positions TRID as one of the world’s largest terry towel manufacturers with 90,000mtpa capacity and strong relationships with leading global retailers across the US and Europe. In bath linen, TRID (3.4% negative CAGR) underperformed Welspun (1.7% CAGR) over FY22-26 due to its higher US exposure (witnessed a slowdown); management is now reducing its dependence on the market.We expect 16% revenue CAGR over FY26-28, driven by volume growth. The bed linen segment, contributing ~15% of revenue, posted a 3% negative CAGR over FY22-26 due to weak demand. To diversify beyond the US, the company plans to expand to Europe, the Middle East, and Australia. TRID also aims to expand its product portfolio to fashion bedding and top-of-bed categories to improve realizations. We believe volume growth momentum would continue after a slowdown in FY26 and expect 16% revenue CAGR over FY26-28.

Valuation and view: Initiate coverage with Neutral rating

We initiate coverage on TRID with a Neutral rating and a TP of INR28, based on 12x FY28E EV/EBITDA, as we believe higher valuation and lower growth reflect limited opportunity. The home textile portfolio is expected to deliver ~6% CAGR over FY26-28, driven by lower tariffs, led by bath followed by bed. Paper and yarn are expected to grow in mid-single-digits over the same period. Overall, we expect 11% CAGR and 130bp margin expansion. We believe higher valuation and lower growth reflects limited opportunity.

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