This stock gained 190% in 1 year, invest in it today to get potential return of 25%

Brokerage firm Motilal Oswal has given a buy call to the stock of Trident Ltd. with a potential gain of 24% in its latest report. Trident has an annual revenue of 6800 crore and provides a vast range of products in the categories of home textiles, stationary, paper, yarn, and chemicals. It has grown into a billion-dollar company in just three decades because of its strong vision.

Motilal Oswal has suggested investors to buy the stock of trident for a target price of Rs 50 apiece. Earlier, TRID had registered a strong growth in revenue led mainly by Home Textiles and Paper segment. The price of the stock was Rs 15.85 apiece on June 1, 2021 and price of stock today is Rs 46.10. it has gained 190% in a span of one year.

1. Stock Overview

The stock of Trident Ltd. Lost 1.50% today on the NSE to close at 46.10. It had touched the day's high and low at 47.95 and 46, respectively. Earlier, stock of Trident Ltd had touched its 52-week high of 70.35 and 52-week low of 15.70. The stock has hit the upper price band of 48.45 and lower price band of 43.85. If we take today's current market price of 46.10 into consideration and target prices of 58, the investors can get a potential gain of 25.81%.

2. Textile Margin likely to remain under pressure

According to Motilal Oswal, the textile is expected to remain under pressure in near future. It is because the demand trend in the US market for Home Textiles to remain under pressure in near future. The brokerage firm has cut its FY23/FY24 EBIDTA (earnings before interest, taxes, depreciation, and amortization) estimate by 10%/9% to factor in input cost pressures in the Textile business. Motilal Oswal has also decided to bring down the TP of TRID to Rs 58/share and maintain a buy rating.

3. Key Financials of Trident Ltd.

The company has reported a growth of 37% in revenue to Rs 18.5 billion. The EBITDA margin also expanded by 30 bp to 17.1% despite an 840bp contraction in the gross margin. The adjusted PAT surged 66% Y-o-Y to Rs 1.60 billion. The revenue from textile rose by 39% Y-o-Y (down 8% Q-o-Q) to Rs 15.7 billion with EBITDA margin expanding by 500 bp Y-o-Y to 14.8%.

The Home Textile segment revenue grew by 10% Yo-Y as a result of higher realization. Revenue from Paper and Chemicals grew by 27% Y-o-Y and 10% Q-o-Q to Rs 2.8 billion.

4. Trident's vision for 2025

According to the brokerage firm, the company has set its vision 2025 wherein it has set three BHAGS (Big, Hairy, Audacious Goals): 1) grow to INR250b by CY25, with a profit of 12% as a business group; 2) make TRID a national brand; and 3) Digital TRID to maneuver through the Industry 4.0 journey.

In the yarn segment, the management has proposed a capacity addition of 98,496 spindles and 3,600 rotors. In the Sheeting division, it is adding an additional capacity of 70,000 meters/day. The management has guided at a total capex of INR13.8b for the above-mentioned capacity expansion, which is expected to be completed by Sep'23. The company will fund this expansion via a combination of debt and equity.

5.Valuation

Motilal Oswal said, "We expect gross margin pressures to sustain till the next cotton season. Outlook for the Home Textile business remains positive for the long term, even as the short-term risk to margin persists. We cut our FY23/FY24 EBIDTA estimate by 10%/9%, factoring in input cost pressure. We value the stock at 23x FY24E EPS to arrive at our TP of INR58."

6. About Trident Limited

Trident has already emerged into a billion-dollar company in just 30 years. The company has worked tirelessly to make a mark on a global scale in a domain that embodies fierce competition. It designs a range of products that are celebrated the world over. It has a market capitalization of 23,492 crore. 

It has built trailblazing infrastructure that can scale and support growth. It has a customer base in more than 150 countries and has more than 25 plants and stores. It has more than 15 global offices. 

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.