Trident Share Price Down 6% After Q4 Results: Should You Buy?

Trident Ltd., one of the leading textile and paper manufacturers in India, reported a 28% year-on-year decline in its consolidated net profit for the fourth quarter of fiscal year 2023. The company posted a net profit of Rs 131 crore for the quarter ended March 31, 2023, compared to Rs 181 crore in the same period last year.

The company’s revenue from operations also fell by 18.5% to Rs 1,608 crore in Q4 FY23, from Rs 1,972 crore in Q4 FY22. The company attributed the lower revenue and profit to the impact of the Covid-19 pandemic and the lockdowns imposed in various parts of the country.

However, despite the weak performance, Trident Ltd. has maintained its dividend payout at Rs 0.36 per share for FY23, implying a dividend yield of 1.07% at the current market price of Rs 33.69 per share.

The company also announced that it has successfully completed its expansion project of adding 1 lakh spindles and 500 looms at its Budhni plant in Madhya Pradesh, which will enhance its production capacity and product portfolio.

So, is Trident Ltd. a good buy at the current levels? Let’s look at some of the factors that may influence your decision.

Pros

Trident Ltd. is one of the largest integrated textile manufacturers in the world, with a presence across yarn, home textiles, and paper segments. The company has a diversified product portfolio, catering to both domestic and international markets. The company exports its products to over 100 countries, including the US, Europe, Latin America, and Africa.

Trident Ltd. has a strong focus on innovation and quality, which has helped it to create a niche for itself in the global textile industry. The company has received several awards and recognitions for its products and processes, such as the Gold Trophy for Highest Exports of Terry Towels by TEXPROCIL, the Guinness World Record for making the world’s largest bed sheet, and the National Energy Conservation Award by the Ministry of Power.

Trident Ltd. has a robust balance sheet, with a low debt-to-equity ratio of 0.17 as of March 31, 2023. The company has also improved its cash flow generation and reduced its working capital cycle in FY23. The company has sufficient liquidity to meet its operational and capital expenditure requirements.

Trident Ltd. has a consistent track record of paying dividends to its shareholders. The company has paid dividends for the last 10 consecutive years, with an average dividend payout ratio of 25%. The company has also rewarded its shareholders with bonus shares and stock splits in the past.

Cons

Trident Ltd. faces intense competition from other textile players in both domestic and international markets. The company competes with established brands such as Welspun India, Indo Count Industries, Himatsingka Seide, and Vardhman Textiles in the home textiles segment, and with players such as Sutlej Textiles, KPR Mill, and Nahar Spinning Mills in the yarn segment.

Trident Ltd. is exposed to various risks related to raw material prices, currency fluctuations, trade barriers, and environmental regulations. The company’s profitability depends on the availability and cost of cotton, which is a key raw material for its textile business. The company also faces volatility in exchange rates, which affects its export revenues and margins. Moreover, the company has to comply with various environmental norms and standards in both domestic and international markets, which may increase its operational costs and liabilities.

Trident Ltd. may face challenges in sustaining its growth momentum in the post-pandemic scenario. The company’s revenue and profit growth may be affected by factors such as lower consumer demand, higher competition, supply chain disruptions, and regulatory uncertainties. The company may also face difficulties in ramping up its production capacity and utilization levels at its new plant.

Conclusion

Trident Ltd. is a well-established textile player with a diversified product portfolio and a global presence. The company has a strong balance sheet, a consistent dividend policy, and a focus on innovation and quality. However, the company also faces several challenges related to competition, raw material prices, currency fluctuations, and environmental regulations.

The company’s share price has declined by 6% after its Q4 results, which may offer an attractive entry point for long-term investors who are looking for exposure to the textile sector. However, investors should also be aware of the risks and uncertainties involved in investing in this sector.

According to Motilal Oswal, Trident Ltd. is a buy with a target price of Rs 7.5 per share, implying an upside potential of over 120% from the current levels.

Disclaimer: 

The information provided in this blog post is for educational and informational purposes only and does not constitute any financial advice. I am not a SEBI registered analyst or advisor and I do not have any authority to give any recommendations or opinions on any stocks, securities, or investments. You should do your own research and consult with a professional before making any investment decisions. I am not responsible for any losses or damages that may arise from your use of this information.