Trident Fundamental Analysis : From Numbers to Insights

Today, let’s talk about Trident Fundamental Analysis. It’s an interesting case – Trident is a big player with a market capitalization of ₹20,521 Crores, but its stock is trading at a price you’d normally associate with penny stocks. Ever wondered why? Well, we’re going to dive into that, chat about stock splits, and give you the complete stock analysis that the market’s been buzzing about. So, stay tuned for the one-stop solution to all your Trident questions. Let’s get started!

About the Company- Trident Fundamental Analysis

The flagship firm of the Trident Group, Trident, which was formerly known as Abhishek Industries Limited, was founded in April 1990. It is one of the biggest makers of towels, agro-based papers, and yarn in the world. It is also one of the biggest yarn producers in India.

One of India’s most diverse corporate conglomerates is called TridentGroup. The company, which was founded in 1990, is still expanding under the energetic direction of its chairman, Mr. Rajinder Gupta, a first-generation businessman. Having started off with just 17,280 spindles of yarn, the business now sells to over 75 nations and works tirelessly to maintain its position as one of India’s top yarn manufacturers.

The company’s operations are divided into four key divisions: yarns, terry towels, paper, and chemicals.

Trident serves Brands, Department Stores, Home Specialty Chains, Mass Merchants, and Institutional Customers among other market groups. Trident produces a wide range of goods in the home textiles, stationery, paper, yarn, and chemicals categories, with annual sales of more than 6800 crores.

The corporation has also entered specialised product sectors in response to shifting industrial demands. The best product to serve these markets is battery grade sulfuric acid. Commercial Grade is likewise produced with the bigger market share in mind. The target market for these items consists of top battery producers and other affluent customers.

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Industrial Trend

India’s Textile Leadership: India proudly holds the second spot globally for textile and garment production. Additionally, it ranks as the fifth-largest exporter of textiles, encompassing apparel, home goods, and technical products. This industry plays a substantial role in India’s economy, contributing 2.3% to the GDP, 13% to industrial production, and 12% to overall exports.

Massive Workforce: A staggering 45 million people find employment in India’s textile sector, with 3.5 million dedicated to handloom production. This industry significantly contributes to job creation in the country.

Bright Growth Prospects: The Indian textile and apparel industry are on a growth trajectory, expected to surge at a Compound Annual Growth Rate (CAGR) of 10%. By 2025-26, it’s poised to reach an impressive US$190 billion. Notably, the Indian apparel market hit US$40 billion in 2020 and is forecasted to skyrocket to US$135 billion by 2025.

Comparative Advantages: India enjoys distinct advantages, including a skilled workforce and cost-effective production, setting it apart from other global textile giants.

Robust Exports: India’s textile exports are in full swing, with total exports reaching US$23.1 billion during April-November in FY23. In FY22, textile and apparel exports, including handicrafts, surged to US$44.4 billion, marking a substantial 41% Year-on-Year (YoY) increase. In particular, exports of readymade garments, including cotton accessories, hit US$16.2 billion in FY23.

Ready-Made Garment (RMG) Triumph: The RMG sector in India is set for a remarkable journey, expected to surpass US$30 billion in exports by 2027, growing at an impressive CAGR of 12-13%.

Foreign Direct Investment (FDI): Foreign investors are showing significant interest, with a total FDI of US$4.2 billion in the textiles industry from April 2000 to March 2023. Importantly, India permits 100% FDI (automatic route) in its textile sector.

Government Backing: The Indian government’s Rs. 10,683 crore (US$1.44 billion) Production-Linked Incentive (PLI) scheme is poised to boost textile manufacturing. This scheme aims to incentivize the production of man-made fiber apparel, fabrics, and various technical textile products.

Worldwide Trade Arrangements: For textiles and handloom, recent trade agreements and economic collaboration with Australia and the UAE have opened up new prospects. With the anticipation of similar agreements with Europe, Canada, the UK, and the GCC countries in the near future, these accords guarantee zero tariffs for Indian textile exports to these countries.

TEXTILES AND APPAREL INDUSTRY REPORT– References: Ministry of Textiles, Indian Textile Journal, Department of Industrial Policy and Promotion, Press Information Bureau

Sustainability-related Projects: Leading textile manufacturers are embracing sustainability by employing recyclable and natural resources to create textiles, satisfying customer demand and upholding environmental responsibility.

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Ever wondered why Trident Ltd trade at a price of a penny stock ?

The fact that a company like Trident Limited, with a market capitalization of ₹20,521 crore, is trading at a price that is often referred to as a “penny stock” could be due to several factors. In Trident Fundamental Analysis, highlighting some of these are some possible reasons:

Earnings Performance: The company’s financial performance may not be strong, leading to low earnings per share (EPS). A low EPS can result in a lower stock price, even for a large-cap company.

Market Sentiment: Negative sentiment in the market or concerns about the company’s future prospects can drive down the stock price, irrespective of its market capitalization.

Industry Trends: The textile industry, in which Trident Limited operates, can be cyclical and susceptible to fluctuations in demand and raw material prices. Industry-specific challenges can impact stock prices.

Lack of Investor Interest: If there is limited investor interest or coverage from analysts and institutional investors, the stock may remain undervalued.

Corporate Governance Issues: Allegations or concerns related to corporate governance can erode investor trust and impact stock prices negatively.

Market Volatility: Broader market conditions and volatility can influence stock prices across the board, including those of large-cap companies.

Company-Specific Factors: Any company-specific issues, such as management changes, regulatory challenges, or product recalls, can influence the stock price.

It’s crucial to remember that a variety of factors, not only the ones listed above, affect stock prices.

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Trident fundamental analysis- Stock Split History

Splits History (Trident)

Trident’s decision to split the face value of its shares from Rs 10 to Rs 1 in 2019 is a corporate action that typically doesn’t impact the intrinsic value or financial health of the company. Instead, it’s more of a cosmetic change that adjusts the nominal value of the shares. The split essentially divides each existing share into ten smaller shares with a lower nominal value. This may lower the price of the stock for regular investors and boost market liquidity.

The split doesn’t alter Trident’s financials, such as earnings, revenue, or assets. It’s purely a change in the way shares are structured. If you owned one share of Trident before the split, you would now have ten shares, each with a tenth of the previous nominal value. However, the total value of your investment remains unchanged.

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Trident Fundamental Analysis- Essentials & Financials

Operating Revenue and Growth: Trident’s operating revenue over the trailing 12 months stands at a substantial Rs. 6,146.07 Crores. However, there is room for improvement, as the company has experienced an annual revenue de-growth of -9%. This suggests a need for strategies to boost revenue in the coming periods.

Profitability Ratios: Trident maintains decent profitability ratios. The Return on Capital Employed (ROCE) is at 11.9%, indicating an efficient use of capital. The Return on Equity (ROE) stands at 11.0%, demonstrating solid returns for shareholders.

Valuation Metrics: The Price to Earnings Ratio (P/E), a key indicator of stock valuation, is relatively high at 50.4. While this figure is lower than its sector’s P/E ratio of 65.2, it surpasses the P/E ratios of competitors like Raymond and Welspun India. Investors should consider the valuation carefully in their investment decisions.

Earnings Per Share (EPS): Trident’s Trailing Twelve Months (TTM) EPS is 0.79 Rs per share, reflecting a -46.77% Year-over-Year (YoY) decrease. This decline warrants attention and further investigation into the company’s earnings performance.

Debt-to-Equity Ratio: The Debt-to-Equity ratio of 0.34 is healthy and falls below 1. This implies that Trident’s assets are predominantly financed through equity rather than debt, which is generally seen as a positive financial indicator.

Dividend and Yield: For the current year, Trident offers a dividend of Rs. 0.36 per share, resulting in a yield of 0.91%. Investors seeking income from their investments may find this dividend yield appealing.

SHAREHOLDING PATTERN

Promoter Holding Stability: Trident has maintained consistent promoter holding at 73.19% during the June 2023 quarter. This stability suggests that the promoters have a substantial and enduring interest in the company’s affairs.

Zero Promoter Pledges: Notably, there are no promoter pledges on Trident’s shares. This is a positive sign as it indicates that the promoters have not leveraged their holdings, which can be a risk factor for investors.

Institutional Holdings: Institutional investors have shown increased interest in Trident during the June 2023 quarter. Foreign Institutional Investors (FII/FPI) have raised their holdings from 2.43% to 2.47%, Mutual Funds have increased their holdings from 0.04% to 0.05%, and overall Institutional Investors have increased their holdings from 2.47% to 2.52%.

This rise in institutional ownership can be viewed as a vote of confidence in the company’s prospects.

Evaluating Financial Statements

Income Statements| Profit & Loss Statements

In this section of our Trident fundamental analysis, we’ll dissect the company’s income trends over the past five years, from March 2019 to March 2023, and the Trailing Twelve Months (TTM) data.

Fluctuating Sales Revenue: When we scrutinize the revenue from sales during this period, we observe a somewhat erratic pattern. It began at 5,249 crores in March 2019, experienced growth, reaching 6,998 crores in March 2022, but then exhibited a decline to 6,332 crores in March 2023. In the TTM, the figure stands at 6,146 crores. This fluctuation in sales revenue raises questions about the company’s ability to sustain consistent growth.

Inconsistent Operating Profit: A similar pattern emerges when we delve into Trident’s operating profit over the five-year span. Starting at 983 crores in March 2019, it experienced an upswing, reaching 1,520 crores in March 2022, only to decline to 947 crores in March 2023. In the TTM, the operating profit stands at 915 crores.

Net Profit Analysis: From March 2019 to March 2022, we witnessed a commendable rise, with net profit increasing from 372 crores to 834 crores. However, in the Trailing Twelve Months (TTM), net profit declined to 404 crores.

EPS (Earnings Per Share): EPS is a pivotal metric, indicating the consistency of growth and profitability. In Trident’s case, EPS has displayed both positive signs and fluctuations over the five-year period. Starting at 0.73 Rs per share in 2019, it climbed to 1.64 in March 2022, showcasing growth. However, the TTM EPS stands at 0.79 Rs per share, indicating some variability.

Trident Ltd.’s financial performance during the last five years has experienced variances in sales revenue, operating profit, net profit, and earnings per share (EPS). A wait and watch for a time being will be worth it.

Cash Flows Statements

Cash Flows from Operating Activities: During the five-year period from March 2019 to March 2023, Cash Flows from Operating activities experienced a notable increase, surging from 656 crores to 1,426 crores, signifying an impressive approximately 117.07% rise. However, it’s essential to note that this growth exhibited inconsistency in the earlier years but has been on the rise for the past two years.

Cash Flows from Investing Activities: Declining and Negative Trends: In contrast, Cash Flows from Investing activities have followed a consistently negative and declining trajectory over the same five-year period. Starting at -51 crores in March 2019, it plummeted to -1,160 crores by March 2023. This indicates substantial investments in assets or projects that have not generated positive returns during this period.

Cash Flows from Financing Activities: Negative but Improving Financing Activities: Cash Flows from Financing activities have been consistently negative but have shown signs of improvement. Beginning at -643 crores in March 2019, this figure increased to -410 crores by March 2023. This suggests that Trident Ltd. may be managing its financing activities more efficiently over time.

Net Cash Flow: Fluctuating Net Cash Flow: The Net Cash Flow, which represents the overall cash movement, exhibited a fluctuating trend from March 2019 to March 2023. It declined from -38 crores to -144 crores during this period, reflecting varying cash inflow and outflow dynamics.

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Limitations Of Trident Ltd.

Profit Growth Analysis: Weak Profit Growth over 3 Years: Over the past three years, Trident has exhibited a lackluster profit growth rate of only 9.14%. This modest growth suggests that the company may face challenges in significantly increasing its profitability within this timeframe.

Revenue Growth Analysis: Limited Revenue Expansion: Similarly, the company has recorded a comparatively sluggish revenue growth rate of 10.23% over the past three years. This indicates that Trident may be experiencing limitations in expanding its top-line earnings during this period.

Possible Interest Capitalization: Indications of Interest Cost Capitalization: It’s worth noting that these lower growth rates could potentially be attributed to interest cost capitalization. This accounting practice involves treating interest costs as part of the company’s asset base rather than immediate expenses, which can impact reported profits and revenues.

Further investigation may be needed to assess the extent and impact of interest cost capitalization on Trident’s financial performance.

Trident Fundamental Analysis: Highlights Of Earnings And Revenues- Annual/Quarterly

Annual Performance Overview: In the past year, Trident witnessed a 9.5% decline in its annual revenue, settling at Rs 6,356.6 Crores. The company’s annual net profit also faced a significant setback, falling by 47.1% to Rs 440.7 Crores. Despite these challenges, the stock price managed a modest 8.7% increase; however, it underperformed its sector by 22.8% during this period.

Quarterly Performance Snapshot: In the most recent quarter, Trident’s quarterly revenue experienced an 11.1% YoY decrease, reaching Rs 1,505.1 Crores. The quarterly net profit followed suit, declining by 27.8% YoY to Rs 93.4 Crores.

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TRIDENT LTD revenue for the last year amounted to 63.32B INR, the most of which 24.54B INR came from its highest performing source at the moment, Towel. The greatest contribution to the revenue figure was made by India last year it brought TRIDENT LTD 28.14B INR, and the year before that 22.55B INR.

BOTTOM LINE

Now we are in a state to sum up our Trident Fundamental Analysis. In our examination over the previous five years, the firm has seen varying levels of sales revenue and operational profit, but operating cash flows have seen a noticeable increase. It has a solid basis, as seen by its continuous promoter holding, good interest coverage ratio, and significant operational leverage. Trident, however, was confronted with difficulties, including diminishing yearly and quarterly revenues as well as a sharp decline in annual net profit. Despite a little increase, the stock price trailed its industry. We can draw an important inference from here that a sound financial management and strategic planning can make a company player of a long-run.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.