Motilal Oswal bullish on Trident has recommended buy rating on the stock with a target price of Rs 83 in its research report dated October 17, 2018.
Motilal Oswal's research report on Trident
TRID’s revenue increased 24.2% YoY to INR13,915m (estimated INR12,121m) in 2QFY19. EBITDA margin expanded 730bp YoY to 22.8% (estimated 20.5%), driven by (1) operating leverage in both bed and bath linen, and (2) premiumization in bed linen. EBITDA adjusted for forex loss increased 83% YoY to INR3,169m (estimated INR2,485m). Adjusted PAT increased 194.5% YoY to INR1,489m (estimated INR936m). TRID has posted 10.3% growth in 1HFY19 with a margin expansion of 430bp. We expect the momentum to continue with a growth of 19.1% in 2HFY19 and a margin expansion of 50bp.
TRID’s bed linen and paper segment have continued their momentum with improving utilization levels. We were earlier cautious about the ramp-up of TRID’s bath linen segment, as management had guided 55% utilization in FY19. However, the company is well on track to achieve its guidance with the segment registering 49% utilization in 1HFY19 (53% in 2QFY19). We raise our earnings estimates for FY19/20 by 17%/7% on the back of strong beat in 2QFY19. We expect 10%/32% revenue/PAT CAGR over FY18-20E. The stock has traded at 9x 1-year forward P/E over the last five years, and we value it at the same multiple on positive outlook and estimated RoE improving 460bp to 13.8% in FY20. Our TP of INR83 implies 30% upside. Maintain Buy.
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