Trident Q3FY17 Concall Summary

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Financial  Highlights

Trident Q3FY17 Financial Performance
  • The net revenue  was Rs. 1139 Cr in  Q3FY17 increasing by 26% compared  to   Rs. 905 Cr in Q3FY16
  • EBITDA improved by 30% to  Rs . 233 Cr translating EBITDA margin of 20.5%
  • PAT grew by 26% to  Rs . 79 Cr against Rs. 62 Cr over corresponding Quarter last year
  • PAT including comprehensive  income improved by 18% to  Rs. 71 Cr
  • Revenue increased by 26% to Rs. 3487 Cr in  9MFY17 while EBITDA increased by 30%  to  Rs. 725 Cr translating into EBITDA margin of  20.8%
  • PAT was Rs. 237 Cr higher by 36% 9 MFY17 compared to Rs. 175 Cr in 9MFY16. PAT including comprehensive income was Rs 240 Cr, an increase  of  35% corresponding period  last year
  • 65-75% of exports are to US and about 15-20% are to Europe

Segment wise performance

  • The percentages of Bath and Bed together as well as Yarn of total revenue for nine months: 48% is with Bed and Bath both and around 19% is Paper and 34% is Yarn
Trident Q3FY17 Segmental Revenue
  • Textile Segment

    • Revenue from textile segment  was Rs . 916 Cr in  n Q3FY17 against Rs.  704 Cr in the Q3 of  FY 16 giving a YoY growth of 30%.
    • EBT was higher by 11% at Rs. 83 Cr and EBT margin was at 9.1%.
    • EBT margin has been declined as of  150 basis point due to  increase in the
    • price of cotton in Q3 FY 16
    • 9 Month Revenue of  textile segment stood at Rs. 2838 Cr higher  by 32%   YoY
    • EBT of textile increased by 26% to Rs. 291 Cr while the EBITDA margin was 10.2%.
  • Paper Segment
    • The revenue  were  higher  by 11% at Rs .  223  Cr compared  to Rs. 201 Cr in Q3 of FY 1 6. In paper size the  increase in realisation on YoY is  4%. QoQ will  be around 1.5-2%.
    • Overall EBT increased sharply by 62% at Rs. 63 Cr translating the EBT margin at  28.4% which is higher by  890 basis point YoY. This was due to better realisation of paper products and higher valuation of paper products.
    • In the paper segment the revenues were up by 5% to Rs. 650 Cr .
    • EBT of paper segment increased to 49% to Rs. 178 Cr translating the  EBT margin of  27.5% higher  by 810 basis point YoY
Trident Geographic Revenue Q3FY17

Awards & Recognition

  • Trident was conferred with runner-up award  of  prestigious  PMI India  award  2016, for  its integrated textile project at  MP.
  • Several awards for energy conservation such as award of National Energy Conservation award 2016 by ministry of power, Govt of  India.
  • EPMA energy conservation award 2016 by Indian paper mill association


Revenue  Analysis

  • Out of total revenue 49% of revenue is from bath & bed both, and  around  19% is from paper and 34% is from yarn .
  • The team appointed in US and UK both is doing well. And in last 9 months the team has as shown a good growth in terms of order book and pipeline and visibility, towel volume has been increased by 20%.
  • Spill over in towels in Q3 and company is confident that Q4 will be better than Q3
  • About 65-70 % export is in US and 15%-20% is in Europe.

 Debt

  • The net debt of Rs. 2608 Cr as on 31 Dec 2016 which is down from Rs. 3273 Cr as of 31 March 2016
  • Debt equity ratio was 1.4x over 1.9x over last year
  • Repaid outstanding term loan of Rs. 78.5 Cr including high rate debt of Rs. 8 er, with this the company has paid Rs. 445 Cr of debt including Rs . 159 Cr of high rate debt
  • Long term  debt as on 31st  Dec 2016 is Rs. 2072 Cr out of which more than 75% is covered under TUF scheme
  • Average cost of the TUF loan is less than 3%.
  • The net debt had gone up about Rs . 100 Cr because of procurement of cotton and inventory
  • In bed linen, the utilization has gone down and is about 27% in this Quarter against 32% in previous Quarter.
  • The company is moving towards right direction with right approach in utilization
  • In FY 18 company is planning to repay Rs. 400 Cr of debts.The payments will be done by free cash flows.
  • Overall debt in Towel segment in FY18 will be Rs. 400-500 Cr less
  • SBI has reduced the MCLR by 150 basis points and he company has already got the benefit of approximately 50 basis points

 EBITDA margins

  • In Textile, EBITDA margins will 18-22%
  • In last 2 years the margin in yarn was between 12% -20% and now, the range is between 15% -22%.
  • In towels the margin is 20-24% due to marketing and US clients.
  • In bed linen they have not even reached breakeven yet. Breakeven is expected in Q4.
  • Decline in EBITDA margin was due to two reasons firstly, the increase in the raw material cost which is cotton, cost of cotton in Q2 was less than the cost of cotton in Q3. Secondly, in this Quarter. the company had a MTM forex of about Rs. 8 Cr like contracts of exports.
  • In towels there is decline in the utilization and was at 46% in the quarter . and in Q2 was 58%.
  • In yarn 45 days is the lead time and cotton prices are increasing so, proportionately the price will increase .
  • In FY 18 the utilization will be around 65% for towels and 50% for bed linen


Impact of high cotton prices

  • Company procures cotton between month of October to March and in yarn there is 45 days lead time and in towel there is 3 months lead time .
  • The utilization of bed linen is 27% in Q3FY17 vs 32% in Q2Fy17. The overall utilization has been declined however, the proportion of processing has been increased significantly. Capacity utilization for paper business stood at 90%
  • In  Q3FY17, the ratio of processed and unprocessed cotton is 90:10.

Capex

  • Capex maintenance will be around Rs. 50-55 Cr in a year.
  • Expansion in Europe and US, penetration in these market and offices are open in Europe to take care of the market.
  • Capex in paper segment
    • No  such  capex  done,  just  evaluation  of  the  existing  operations  to  meet  the margins. Debottenecking can improve production by 15-20%

Update on Clients

  •  Increase in clientele base and major growth is from visiting clients, no exact data of clients as of now
  • Many clients had been added mostly in US in last Quarter and this Quarter
  • Penetration in new market also will be  done
  • No of customers for bed linen was 5 in Q3FY17, out of which 2 are big customers.

Regulatory Updates

  • Import duty in US
    • India has an inherent advantage in cotton and that will be kept in consideration while preparing import regulations by  US.
    • Import duty is 9% in bed and home textile in US
  • Demonetization impact on paper  segment
    • Paper segment is having good demand and demonetization has no impact in India
  • New notification of rebate of Ministry of textile on exports.
    • Rates are still not decided but 3-4% on output cost, 2% for  procurement and 5% of VAT
  • Effects of 3.5% of duty from the govt notification.
    • That is generic for bed & bath and the rate has not been decided yet and duty drawback committee will sit and decide the same and can be done anytime in future

Price expectation

  • Possibility of decrease of price in FY 18  in  Paper industry
  • It completely depends on price & demand.
  • FY18 will be good for the paper (writing, printing & copier ).Import from Indonesia is in writing and printing.
  • Cotton production is expected to be increased and cotton prices also hiked and reached to 42000 per candy, in December the rates was 40000 per candy.

 
Realisation in yarn

  • Only bed linen has been increased to 15% and other as similar to last quarter.
  • YoY the  towel realisation was less around 6% whereas yarn was 13 % higher

Capacity Utilisations

  • Capacity Utilization of Bed Linen facility was 29% in 9M FY17, while the utilization in Bath Linen stood at 49% based on tonnage capacity. Yarn business also reported improved utilization level of 92%.
  • in Bed Linen, the utilizations are lower. It is at 27% in this quarter as against 32% in the previous quarter which is Q2. However,  60% was processed and 40% was non quarter. The proportion is 90-10 in Q3FY17, and so realizations are going to improve.
  • Towel segment capacity is 90000 ton details.The segment is given as of maximum rated limit and at normal capacity it will be around 75-80% can be achieved.India is more competitive than china in towel and cotton.
  • The capacity in paper is around 1 lakh 75 thousand ton per annum and utilization is 90%.

Cotton procurement prices/ hand textile fair response.

  •  Average  cotton prices are around  42000  per candy.
  • The yield in cotton per hectare has been increased.
  • For every 20% increase in cotton prices the impact at  Yarn level is around 8% to 10% whereas in Towel and Bed Linen, it is around 5%
    to 6% only.
  • Very good response for hand textile for bed sheets, towels, and other products

Patents benefits

  • Patents always showcase the customers as a USP and they look as a different Product and it keep the company ahead from the other compet it ors.
  • Paper demand is increasing day by day

Guidance for FY 18

  • FY 18 seems very promising, as all the initiative taken by the Company in past, have started delivering results and momentum will be good in upcoming  quarter
  • Top management of company is ready to focus on global scale capacity in shortest possible time, the company is confident of generation robust cash flow  and  will create tremendous value for the stakeholders
  • Demand of writing, copier, and printing is good and 50% of production is from printing & writing which is B2B and 50% is copier right now
  • Company will increase the copier paper segment.
  • The company topline will grow by 20% in FY 18.
  • Rs. 400 Cr debts wil be repaid per year and the flow of cash will be there and the cash generation will be more than the  payment
  • Demand in US and globally will be flat only in towel segment
  • The proportion of Indian products is increasing at 10% CAGR YoY.

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