2 March 2021
Company Update | Sector: Textiles
Trident
Buy
BSE SENSEX
50,297
S&P CNX
14,919
CMP: INR14
TP: INR19 (+36%)
Paper biz. to also drive growth hereafter!
Trident (TRID)’s Paper segment, which contributed 20%/55% to FY20 revenue/EBIT,
is expected to post a better performance in the upcoming quarter. It would be
supported by improving demand, led by the opening up of educational institutes and
corporate offices and the start of a new academic year. TRID is yet to recover to pre-
COVID levels, particularly on the margin front – it is weighed by lower demand and
prices. We interacted with the CEO of the Paper division of TRID – Mr Naveet Jindal
to get his perspective on the Paper industry and TRID’s Paper division. Against this
backdrop, in this note, we have highlighted the current demand situation and the
pricing scenario for the Paper industry. We have further detailed how it is expected
to move going forward. The following are the key insights:
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Financials Snapshot (INR b)
Y/E MARCH
FY21E
Sales
45.5
EBITDA
8.3
Adj. PAT
3.4
EBITDA Margin(%)
11.0
Adj. EPS (INR)*
0.7
EPS Gr. (%)
5.6
BV/Sh. (INR)
6.8
Ratios
Net D:E
0.4
RoE (%)
10.6
RoCE (%)
8.2
Payout (%)
7.2
Valuations
P/E (x)
20.3
EV/EBITDA (x)
9.8
Div. Yield (%)
0.3
FCF Yield (%)
5.4
*Cons.
Shareholding pattern (%)
As On
Dec-20
Promoter
73.0
DII
0.9
FII
3.6
Others
22.5
Stock Performance (1-year)
20
15
10
5
0
Trident
TRID IN
4,978
71.1 / 1
17 / 3
-3/87/121
185
27.0
2022E
56.6
10.8
5.2
12.8
1.0
53.4
7.7
0.4
14.4
11.3
12.0
13.2
7.7
0.8
0.2
2023E
64.0
12.6
6.7
13.8
1.3
29.2
8.9
0.2
16.2
13.0
12.0
10.3
6.3
1.0
12.5
World’s largest wheat straw-based paper manufacturer
Sep-20
71.8
1.0
1.6
25.6
Dec-19
71.1
1.0
2.2
25.8
FII Includes depository receipts
Sensex - Rebased
TRID is the world’s largest manufacturer of wheat straw-based paper, with
annual capacity of 175,000mt.
The company uses wheat straw, an eco-friendly raw material, which is a
by-product of wheat. This facilitates easy procurement at attractive pricing
as Punjab is the highest wheat-producing state in the country.
TRID has 12% market share in India in the Copier segment; in NCR and the
North region, TRID has 30%+ market share. In Punjab, the company has
market share of 50%.
Wheat straw constitutes 65% of the RM for TRID – it is procured from
within a 100–150km radius. Avg cost of wheat straw (bone dry metric ton)
is INR4,550/mt.
Waste wood chips make up the remaining 35% of the RM. These are
generated by the Wood industry and procured from within a 150km
radius. The cost of wood chips stands at INR8,500/mt.
Cost of manufacturing wheat straw-based paper is lower v/s wood-based
paper manufacturing. This ensures a higher EBITDA margin of 35.7%
(FY20) v/s peers (JK Paper: 28.5%, TNPL: 18%, West Coast: 25%). For FY20,
EBITDA/mt for TRID stood at INR21,879 – v/s JK Paper at INR15,500, TNPL
at INR11,059, and West Coast at INR16,457.
TRID’s capacity utilization in the Paper segment stood at 86% in FY20, with
EBITDA/mt of INR21,879 (down 19% YoY, primarily due to price decline).
In 9MFY21, the Paper segment’s revenue/EBIT declined 31%/52% YoY on
account of 16% decline in sales volumes. This was weighed by lower
demand on account of the pandemic (lower demand for copier paper /
maplitho as offices / educational institutes were closed and lower demand
from government institutions) and 15% YoY decline in realization.
Capacity utilization for 9MFY21 stood at 74% for Paper; this was 87%/80%
in 3QFY21/2QFY21. In Jan’21, plants were operating at 91% capacity
utilization.
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com)
Research Analyst: Darshit Shah
(Darshit.Shah@MotilalOswal.com) |
Yusuf Inamdar
(Yusuf.Inamdar@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.