Why Trident Share Price is Rising: A Comprehensive Analysis

In 1990, Trident Limited made a strategic decision to focus on one of the three basic necessities of life: clothing. This marked the beginning of its journey in the textile industry. Over the years, despite occasional downturns, Trident has been one of the few stocks that have delivered consistent returns. With a staggering 1,600% return over the past five years, its share price has rallied 530.4% during the same period. However, the recent past has seen a range-bound share price, with a modest 22.1% increase over the last year. Yet, a recent surge of 8.1% in a single day has brought renewed optimism. This blog delves into the factors behind this upswing and explores whether the good times are truly back for Trident.

1. Strategic Acquisition in Step-Down Subsidiary

On June 11, 2024, Trident announced that its fully owned subsidiary, Trident Home Textiles, further invested an additional €5,000 into its wholly-owned subsidiary, Trident Global BV. Trident Global BV, incorporated last year in the Netherlands, is involved in the wholesale business of textiles, paper, non-food consumer goods, and clothing accessories. This increased investment indicates Trident’s growing commitment to expanding beyond the Indian market. While specific details of the fund’s usage remain undisclosed, the overarching message is one of international ambition. This move suggests that Trident is looking to strengthen its global footprint, which could have a long-term positive impact on its share price.

2. Expansion Plans in Yarn Business

On December 29, 2023, Trident announced the expansion of its current yarn business capacity at the Budhni unit in Madhya Pradesh. The company added 189,696 spindles, with an investment cost of ₹8.3 billion. This expansion, financed through a combination of term loans and internal accruals, brings the company's updated capacity to 589,248 spindles, 7,464 rotors, and 160 air jets, with a utilization rate of 82%. Financing through term loans and internal accruals indicates financial stability and prudent management. Increased production capabilities can lead to economies of scale, lower per-unit costs, and an improved competitive advantage, strengthening Trident's position in the competitive textile market.

3. Vision 2025 Goals

In 2021, Trident announced ambitious targets under its “Vision 2025” plan, aiming to achieve a revenue of ₹250 billion with a 12% bottom line. The company has taken various initiatives to accomplish these targets, including launching an e-commerce website, opening retail outlets, enhancing its social media presence, and diversifying its product range to make Trident a national brand. 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, digitalization of products, virtual showrooms, and secured four additional patents. These efforts boosted the company’s total revenue for FY24 to ₹67.9 billion, with sales growth of 7.9% compared to FY23, primarily due to increased demand. However, the profit before tax decreased by 6.9% year-on-year in FY24 due to a reduction in net sales realization. While these results show significant progress, only time will tell whether the company will achieve its Vision 2025 goals.

Recent Share Price Performance

In the past five days, Trident’s share price has rallied 10.7%. Over the last month, it is up 7.5%. In 2024, so far, its share price has surged 11.9%, and it has increased by 22.1% in the last year. The stock touched its 52-week high of ₹52.9 on January 9, 2024, and a 52-week low of ₹31.7 on July 28, 2023.

About Trident Limited

Trident operates mainly under three segments: yarn, home textiles, and paper. In the home textiles segment, the company manufactures terry towels and bed linen. When the company commenced its business in 1990, it was primarily into yarn and paper production. Over the years, Trident has successfully transformed itself from a yarn manufacturer to a vertically integrated home textile player, which has helped the company garner higher margins and de-risk its business profile.

In Conclusion, Trident’s strategic acquisitions, expansion plans, and ambitious Vision 2025 targets indicate a positive future outlook. The company’s recent performance and proactive initiatives suggest that the recent surge in its share price could be a sustainable rally rather than a temporary blip. However, as with any investment, potential investors should keep a close eye on further developments and the company’s ability to achieve its long-term goals.