Why Trident Share Price is Rising

Roti, kapda, makan - these are three basic necessities of life. In 1990, Trident made a strategic decision to focus on the second requirement and embarked on its journey in the textile industry.

Barring occasional downturns, Trident is one of the few stocks that has delivered consistent returns.

Take a look at the chart below.

It generated a staggering return of around 1,600% over the past five years.

In the past five years its share price rallied 530.4%.

However, the recent past witnessed a range-bound share price, with a modest 22.1% increase over the last year, a seemingly muted performance.

But, a recent surge has brought renewed optimism. Trident's share price jumped 8.1% in a single day, sparking the question: Is this a sustainable rally or a temporary blip?

Let's delve into the factors behind this upswing and see if the good times are truly back for Trident.

#1 Further Acquisition in Step Down Subsidiary

On 11 June, 2024, Trident disclosed that its fully owned subsidiary - Trident Home Textiles - further invested an additional Euro 5,000 into its own wholly-owned subsidiary, Trident Global BV.

Trident Global BV is a wholly owned subsidiary of Trident Home Textiles, hence it is a step down subsidiary of Trident.

Trident Global BV was incorporated to do wholesale business of textiles, paper, non-food consumer goods, and clothing accessories in the Netherlands. It was incorporated last year.

This increased investment in Trident Global BV, suggests Trident's growing commitment to expanding beyond the Indian market.

While the exact details of how these additional funds will be used are yet to be revealed, the overall message seems to be one of international ambition.

Further information regarding the specific use of funds and the targeted markets could provide even more insight into the potential long-term impact on Trident share price.

Apart from yesterday's move, a noticeable uptick in the company's share price was also seen in January 2024 due to the following reason.

#2 Expansion Plans

On 29 December 2023, Friday, the textile giant announced the expansion of its current yarn business capacity at the Budhni unit in Madhya Pradesh.

The company added its capacity by 189,696 spindles, incurring an investment cost of Rs 8.3 billion (bn). The investment was financed through a combination of term loans and internal accruals.

The company's updated capacity now stands at 589,248 spindles, 7,464 rotors, and 160 air jets, with a utilisation rate of 82%.

The fact that this investment was financed through a combination of term loans and internal accruals suggests financial stability and prudent management.

Also, expanding capacity can help the company strengthen its position in the competitive textile market. Increased production capabilities can lead to economies of scale, lower per-unit costs, and an improved competitive advantage.

What Next?

In 2021, Trident announced ambitious targets for FY25. Under its "Vision 2025", plan it set the following targets.

• Achieving a revenue of Rs 250 bn with a 12% bottom line.
• Making Trident a national brand.
• Completing the journey to Industry 4.0.

Over the past years, the company has taken various initiatives to accomplish its targets.

To make Trident a national brand, it has launched an e-commerce website, opened retail outlets, enhanced its social media presence, and diversified its product range.

In its Digital Trident initiative, aimed at completing the Industry 4.0 journey, the company has implemented e-sourcing, real-time performance monitoring, AI-enabled projects, digitalisation of products, virtual showrooms, and secured four additional patents.

It is important to note that in FY24, these efforts boosted the company's top line to new heights, although the bottom line did not see a similar increase.

The total revenue for FY24 stood at Rs 67.9 bn, with sales growth of 7.9% compared to FY23, primarily due to increased demand. However, the profit before decreased by 6.9% year-on-year (YoY) in FY24 due to a reduction in net sales realisation (NSR).

While these results show significant progress, only time will tell whether the company will achieve its Vision 2025 goals.

How Trident Share Price has Performed Recently

In the past five days, Trident share price has rallied 10.7%. In the last month, it is up 7.5%.

In 2024, so far its share price has surged 11.9% and its up 22.1% in the last year.

The stock touched its 52-week high of Rs 52.9 on 9 January 2024 and a 52-week low of Rs 31.7 on 28 July 2023.

About Trident

Trident mainly operates under three segments: yarn, home textiles, and paper. In the home textiles segment, the company manufactures terry towels and bed linen.

Back in 1990, when the company commenced its business, it was mainly into yarn and paper production.

The company has successfully transformed itself from a yarn manufacturer to a vertically integrated home textile player which would help the company to garner higher margins and de-risk its business profile.

To know more, check out Trident's financial factsheet and its latest quarterly results.

You can also compare Trident with its peers:

Trident vs Ambika Cotton

Trident vs APM Industries

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...