Indian Textile Industry in a sweet spot!!

Transcription

1 Indian Textile Industry in a sweet spot!! Industry Overview The Indian textile industry is one the most important industries for the Indian economy considering its contribution to employment generation, industrial output and foreign exchange earnings. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The textile and apparel industry can be broadly divided into two segments - yarn and fibre, and processed fabrics and apparel. India accounts for ~14 per cent of the world's production of textile fibres and yarns (largest producer of jute, second largest producer of silk and cotton, and third largest in cellulosic fibre). India has the highest loom capacity (including hand looms) with 63 per cent of the world's market share. The domestic textile and apparel industry in India is estimated to reach US$ 141 billion by 2021 from US$ 67 billion in Increased penetration of organized retail, favorable demographics, and rising income levels are likely to drive demand for textiles. India is the world's second largest exporter of textiles and clothing. Textile and apparel exports from India are expected to increase to US$ 82 billion by 2021 from US$ 40 billion in Readymade garments remain the largest contributor to total textile and apparel exports from India. In FY15 the segment had a share of 40 per cent of all textile and apparel exports. Cotton and man-made textiles were the other major contributors with shares of 31 per cent and 16 per cent, respectively. India s textile industry market size in USD billion

2 Indian textile industry set to Grow Improving prospects for India s textile industry Yarn and Fiber being one of the basic necessity products, the textile sector is one of the key contributors to economic growth, both on the international and domestic front. Developed countries like US and European Union concentrate more on the consumption side where as emerging markets like China, India, Bangladesh, Vietnam focuses on manufacturing owing to lower cost in these regions. Among the emerging nations, currently China is a dominant player in the global textile trade. This however is likely to change owing to increasing labor and production cost in the region, offering a wide opportunity to India. In addition, the appreciation of Yuan against the USD vis a vis a depreciation of INR against the USD offers a competitive advantage to India in the export markets. We expect India to benefit from the cost competitiveness which could provide opportunities for the textile industry. Considering the importance of the textile sector, the Central Government has implemented important policies that are expected to catalyse the growth of the Indian textile sector over the coming years. The TUFS scheme of the Government of India and other subsidy schemes of various state governments have kept the cost of borrowed funds in low single-digit, ensured continuous power at subsidised cost and other benefits like capital subsidy and sales tax/vat concession. Besides, the Government has allowed 100% FDI under the automatic route facilitation foreign investments. Rising government focus and favourable policies is leading to growth in the textiles and clothing industry. Foreign direct investment (FDI) in textile sector increased to US$ 1,587.8 million in FY15 from US$ 1,424.9 million in FY14. The Ministry of Textiles is encouraging investments through increasing focus on schemes such as Technology Up-gradation Fund Scheme (TUFS). To promote apparel exports, 12 locations have been approved by the government to set up apparel parks for exports. As per the 12th Five Year Plan, the Government plans to provide a budgetary support of US$ 4.25 billion to textiles. Free trade with ASEAN countries and proposed agreement with European Union will also help boost exports. The outlook of Indian textile industry is positive over the medium to long-term. The sector is likely to grow at a good pace with domestic consumption as well as exports demand growing hand in hand. The Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021.

3 China s slowdown in T & A export to benefit India China s share in global T&A export to reduce from present level due to two major factors 1. Increased growths in China s domestic demand driven by higher incomes and increased per capita spend on apparel. a. On supply side, China s shift towards service economy and manufacturing of value added sectors to result in a changing supply chain landscape; this will benefit of South East Asian countries. b. Rising per capita income making China a self consuming economy (domestic consumption growing at 13% CAGR) likely to impact its ability to export. 2. Chinese export becoming uncompetitive. a. Chinese manufacturing becoming less competitive due to rising labor and power cost which has resulted in decline in T&A exports from China. Wages in China have doubled over the past five years. Monthly manufacturing wages in Shanghai were about $ , about three times higher than those in Hanoi, Vietnam's capital. b. Indian products are design lead compared to commoditized products of China. We recommend a buy on VTL, Trident and RSWM refer valuation table for further details Despite the ongoing capex in all the companies debt has been under check and in reducing mode from FY17. Company CMP Mcap FY12 FY13 FY14 FY15 FY16 FY17 RSWM Vardhman 1,338 7, Trident 86 4, Valuations indicate that the stocks are not expensive; under reasonable multiple assumption our top pick is VTL (+30.7%) followed by Trident (+31.2%) and RSWM (27.2% Upside). ---Target Multiple Target on FY19e --- Company CMP Mcap P/E Cash P/E EV/E P/E Cash P/E EV/E Avg TP Upside (%) KPR 765 5, (12.9) RSWM Indo Count Vardhman 1,338 7, Banswara (16.1) Sutlej 930 1, (6.7) Trident 86 4, SP Apparels (12.0)

4 Vardhman Textiles Limited

5 Vardhaman Textile Limited (VTL) ; Man among boys!! Maintain Buy with a TP of INR1750/sh (+31% Upside) Buy Price at 12 May 2017 (INR) Price target - 12mth (INR) week range (INR) BSE Price Performance( To ) Diversified Product Portfolio The Co is present across various products like Fabrics, yarn, sewing threads, garments, steels. This presence across the entire spectrum has helped the company to de-risk its business model and be less prone to the cyclicality of a particular business segment. The company has been continuously moving up the value chain which is likely to help increase sales volumes and aid margin expansion. Sustainable Growth Performance (%) 1m 3m Absolute BSE Stock data Market cap (INRm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) Key Indicators (Mar-2017) (Mar-2016) ROE (%) Debt/equity (x) Price/book (x) Net interest cover (x) Operating profit margin (%) EPS PE Ratio Shareholding Pattern (Mar-2017) 12m % VTL is currently amidst expanding its capacity mainly in the Fabric segment. This will help tap the opportunity in the high margin fabric segment, although the top-line for FY17 is likely to be subdued owing to the full capacity utilization and demonetization impact on domestic market, the same is likely to pick up FY18 onwards. VTL is operating at optimum capacity VTL is currently operating at optimum capacity which is benefited from capacity expansion. As the yarn segment is more volatile, the company is looking at expanding capacity in the better margin fabric space. VTL plans to incur a capex of 1,000 crore over FY16-19, of which 600 crore is for fabric capacity expansion. The benefits of the capacity expansion to be seen over the next 2-3 years. VTL has reduced debt in spite of increasing capex In spite of incurring a capex over the last 5 years, VTL has been able to reduce its debt/equity ratio. During FY17, VTL has sold 40% stake (of 51%) in its subsidiary VYTL to its JV partner for 396 crore and this will help in VTL s business expansion plan. Company net debt has reduced by a whopping INR902cr and we expect company to generate cash (PAT + Depr) of INR3700cr over FY17-19e indicating that at INR7340cr Mcap the stock is available yet at reasonable valuations. Valuations ; maintain TP of INR1750/sh (+31% Upside) We derive our TP based on average of P/E of 12x and EV/E of 5.5x on on FY19e earnings. Given the strong B/S and high margins that the company generates the multiples are reasonable on the contrary any possible acquisition might be seem favorable. Key Financials FY14 FY15 FY16 FY17 FY18e FY19e Revenues 6,240 6,952 6,006 6,261 6,887 7,576 EBITDA 1,537 1,284 1,287 1,420 1,521 1,598 Reported PAT EPS (INR) EBIDTA (%) PAT (%) PE (x) EV/EBITDA(x)

6 Key Financials - VTL Income statement (Mn) FY14 FY15 FY16 FY17 FY18e FY19e Income from operations 6,240 6,952 6,006 6,261 6,887 7,576 Total operating expenses 4,703 5,668 4,719 4,841 5,366 5,978 EBITDA 1,537 1,284 1,287 1,420 1,521 1,598 Reported profit Adjusted net profit Growth metrics (%) Revenue growth (%) (13.6) EBITDA 50.2 (16.5) PBT 90.6 (40.3) Net profit (44.3) (19.1) 6.5 EPS (43.3) (19.1) 6.5 Balance sheet FY14 FY15 FY16 FY17 FY18e FY19e Equity capital Reserves & surplus 3,070 3,313 3,784 4,218 4,615 5,038 Shareholders funds 3,132 3,375 3,846 4,273 4,670 5,093 Borrowings 2,896 1,892 2,209 1,809 1,409 1,009 Minority interest Sources of funds 6,717 5,932 6,640 6,464 6,531 6,624 Net block 2,884 2,653 2,968 2,589 2,532 2,454 Capital work in progress Total fixed assets 2,979 2,737 2,968 2,639 2,532 2,454 Investments ,132 1,868 1,812 1,814 Net current assets 2,954 2,326 2,541 1,957 2,187 2,356 Uses of funds 6,717 5,932 6,640 6,464 6,531 6,624 Book value per share (BV) Ratios FY14 FY15 FY16 FY17 FY18e FY19e ROE (%) ROCE (%) Net debt/equity (0.04) Debt/Equity Valuations parameters FY14 FY15 FY16 FY17 FY18e FY19e EPS (INR) YoY growth (%) (43.3) (19.1) 6.5 CEPS (INR) PE (x) Price/BV(x) EV/Sales (x) EV/EBITDA (x)

7 4QFY17 in line with expectations. QFY17 Vardhman textiles results were in line to our expectations; Company has performed with stupendous growth of INR16085cr (-3%YoY; 9%QoQ) driving EBITDA to INR324cr (-15%YoY;-12% QoQ), margins plummeted by - 288bps YoY to 20% as Raw materials cost increased driving PAT to INR159cr (-1% YoY; -17% QoQ). We expect FY18e EPS to be INR144/sh (35% YoY). While we expect margins to hold on the top-line growth is the key driving factor for Vardhman textiles. DESCRIPTION Mar-17 Mar-16 YoY (%) Dec-16 Q oq (%) FY17 FY16 YoY (%) Net Sales % % % Other operating income % 62-21% % Net Sales & Other Op Income % % % Total Expenditure % % % (Inc / Dec In Stocks) % -76 0% % Purchase of Fin Goods 7 5 0% -3 0% % Cost of Services & RM % 751 8% % Op & M Exp % 221-8% % Electricity, Power & Fuel % 145 1% % Employee Cost % 123 3% % PBIDT (Excl OI) % % % Other Income 0 0 0% 0 0% 0 0 0% Operating Profit % % % Interest % 20 6% % Exceptional Items 0 0 0% 0 0% 0 0 0% PBDT % % % Depreciation % 85 6% % PBT % % % Tax % 76-25% % Extraordinary Items Consolidated Net Profit % % % EPS % 31-8% % Cash EPS % 45-1% % Exp as % of sales Mar-17 Mar-16 Chg (bps) Dec-16 Chg (bps) FY17 FY16 Chg (bps) Cost of Services & RM. 45% 45% % % 47% Op & M Exp. 14% 15% % 0 13% 14% Electricity, Power & Fuel. 9% 10% -14 9% 0 10% 11% Employee Cost. 8% 8% 7 8% -42 8% 7% 42 Margins % Mar-17 Mar-16 Chg (bps) Dec-16 Chg (bps) FY17 FY16 Chg (bps) PBIDTM% (Excl OI) PATM% Tax (%)

8 VTL Quarterly-Segment Description Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 REVENUE FROM OPERATIONS 1,763 1,598 1,617 1,578 1,703 Fabric Textiles 1,613 1,421 1,443 1,435 1,550 Unallocate Less Inter Segment Revenue Net Sales/Inc. From Ops. 1,651 1,474 1,497 1,469 1,608 Growth QoQ (%) Fabric Textiles Unallocate Net Sales/Inc. From Ops PBIT Fabric Textiles Unallocate Less Interest Other Un-Allocable Exp (2) (13) (283) (11) (12) Total Profit Before Tax EBIT Margin (%) Fabric Textiles Unallocate CAPITAL EMPLOYED 7,210 6,799 7,391 7,484 6,894 Capital Work In Progress Fabric Textiles 5,265 4,670 4,144 4,212 4,505 Unallocate 1,515 1,766 2,871 2,888 2,072 ROCE (%) Fabric Textiles Unallocate

9 Better operating margin performance vs peers VTL having better operating margin compared to its peers and higher EBITDA margins will outweigh lower assets turns and improve Vardhman s profile and invested capital will help improve higher profitability margins in future. Strong Free Cash Flow puts co in strong spot VTL s strong cash flows will support the co to repay its debt.

10 Debt Equity ratio to reduce still in future Despite the ongoing capex over the years, the company has managed to bring down the debt/equity ratio. Over the next two years, we expect the cash to be used to pay debt. This will also aid the company to improve the normalized return ratios in the long run. Benefits of Capacity Expansion VTL is expanding its fabric capacity and future expansions are likely to be mainly for increasing fabric capacity and whatever capacity expansions in the yarn segment would be mainly aimed at meeting the internal demand of yarn for scaling up the fabric production. VTL has incurred a capital expenditure of ~INR2000 crore in the last 5 years. Over the same period, it has registered revenue CAGR of 8%. Currently, VTL operates at near 100% utilization and hence does not expect significant growth in FY18e. The company is currently consolidating its fabric business and is looking at expanding capacity in this space. In FY16, VTL announced a capital expenditure of INR1000 crore over 3 years towards increasing weaving (looms) capacities, increasing yarn dyed and printing fabric capacity, besides some line balancing equipment. Post the capex, grey fabric capacity will increase to 210 mm from 170 mm currently and processed fabric capacity will increase to 150 mm from 110 mm now (including 18 mm of printed fabric line). VTL margins are among the best in the industry FY17e EBITDA Company Sales EBITDA PAT EPS Margin (%) PAT Margin (%) KPR 2, RSWM 2, Indo Count 2, Vardhman 6,184 1,470 1, Banswara 1, Sutlej 2, Mandhana 1, Sangam 1, Damodar Trident 4, Gokaldas Exp 804 (10) (27) (1.2) (3.3) SP Apparels

11 RSWM

12 RSWM ; operating leverage to play out/ Maintain Buy with a TP of INR540/sh (+27% Upside) Buy Price at 12 May 2017 (INR) Price target - 12mth (INR) week range (INR) BSE Price Performance( To ) RSWM 4QFY17 disappoints 4QFY17 results of RSWM were below expectations; Top line increased by INR823cr (+6%YoY; 18%QoQ) However margins declined by 654bps to 9% on account of increased Operating and Raw materials cost driving the EBITDA to INR71cr (-40%YoY; +7%QoQ). PAT at INR29cr (-8%YoY; +208%QoQ) translating to an EPS of INR12/sh for 4QFY17. Cash EPS of INR99/sh indicate that the stock is trading at Cash P/E of 4.3x FY17 earnings; we believe that operational benefits are likely to play out post the multiple initiatives taken by the company. Performance (%) 1m 3m Absolute BSE Stock data Market cap (INRm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) Key Indicators (Mar-2017) ROE (%) Debt/equity (x) Book value/share (INR) Price/book (x) Net interest cover (x) Operating profit margin (%) EPS PE Ratio Shareholding Pattern (Mar-2017) 12m % Capex benefit to kick in. The Company has continuously invested in modernization and expansion of all its business verticals. In the last five years it invested INR885cr towards this goal. While capacity enhancement has facilitated cost-competitiveness, technology up gradation has ensured superior product quality Value addition and capability enhancement likely to help bridge margin gap The Company working on its value addition with focused efforts towards widening the proportion of value-added variants in its product basket in line with evolving industry trends and customer requirements. This should cement its identity as a preferred partner to discerning Indian and global brands. Even as the Company is growing in size, the management is focused on improving business efficiencies namely strengthening productivity, improving resource procurement and utilization and eliminating wastages. This cost-competitiveness is expected to sustain business operations through good times and bad Valuations; Maintain BUY with a TP of INR540/sh (+27% Upside) We derive our TP based on average of 9xP/E, 5xCash P/E and 6x EV/E on FY19e earning. Key Financials FY15 FY16 FY17 FY18e FY19e Revenues 3,023 2,970 3,004 3,198 3,516 EBITDA Reported PAT EPS (INR) EBIDTA (%) PAT (%) PE (x) EV/EBITDA(x)

13 Key Financials - RSWM Income statement (Mn) FY14 FY15 FY16 FY17 FY18e FY19e Income from operations 3,146 3,023 2,970 3,004 3,198 3,516 Total operating expenses 2,744 2,657 2,559 2,667 2,842 3,152 EBITDA Reported profit Adjusted net profit Dividend per share Growth metrics (%) Revenue growth (%) 17.9 (3.9) (1.8) EBITDA 16.1 (9.0) 12.3 (18.0) EPS 41.2 (16.1) 25.4 (6.8) Balance sheet FY14 FY15 FY16 FY17 FY18e FY19e Equity capital Reserves & surplus Shareholders funds Borrowings 1,141 1,117 1,189 1,287 1,140 1,060 Minority interest Sources of funds 1,586 1,644 1,899 1,985 2,014 2,037 Net block 1,007 1,161 1,143 1,190 1,151 1,126 Capital work in progress Total fixed assets 1,013 1,161 1,143 1,190 1,151 1,126 Investments Net current assets Uses of funds 1,577 1,644 1,899 2,004 2,014 2,037 Book value per share (BV) Ratios FY14 FY15 FY16 FY17 FY18e FY19e ROE (%) ROCE (%) Net debt/equity Debt/Equity Valuations parameters FY14 FY15 FY16 FY17 FY18e FY19e EPS (INR) YoY growth (%) 41.2 (16.1) 25.4 (6.8) CEPS (INR) PE (x) Price/BV(x) EV/Sales (x) EV/EBITDA (x)

14 4QFY17 disappoints 4QFY17 results of RSWM were below expectations; Top line increased by INR823cr (+6%YoY; 18%QoQ) However margins declined by 654bps to 9% on account of increased Operating and Raw materials cost driving the EBITDA to INR71cr (-40%YoY; +7%QoQ). PAT at INR29cr (-8%YoY; +208%QoQ) translating to an EPS of INR12/sh for 4QFY17. Particulars Mar-17 Mar-16 YoY(%) Dec-16 Q0Q(%) FY17 FY16 YoY(%) Net Sales % % 2,994 2,955 1% Other opr income % 4-100% % Net Sales & Other Op Inc % % 3,004 2,970 1% Total Expenditure % % 2,667 2,559 4% (Inc) / Dec In Stocks % (52) -190% (56) (5) 976% Purchase of Fin Goods % 9-21% % Cost of Services & RM % 435 4% 1,721 1,606 7% Opr & Manu Exp % % % Power & Fuel Cost % % % Employee Cost % 92-10% % PBIDT (Excl OI) % 66 7% % Other Income % 4 209% % Operating Profit % 70 18% % Interest % 27 2% % PBDT % 43 29% % Depreciation % 31 3% % PBT % 12 96% % Tax (6) % 2-330% % Profit After Tax % 9 208% % EPS % 4 208% % Cash EPS % 17 51% % Exp as % of sales Mar-17 Mar-16 Chg(bps) Dec-16 Chg(bps) FY17 FY16 Chg(bps) Raw Materials Opr & Manu Exp Emp Cost (300) Margins (%) Mar-17 Mar-16 Chg(bps) Dec-16 Chg(bps) FY17 FY16 Chg(bps) PBIDTM% (Excl OI) (80) (262) PATM% (22) Tax(%) (24.40) (4,521) (1,490) RSWM making its business stronger RSWM has built one of the most impressive textile manufacturing infrastructures in the country which exports a complete range of yarn and fabric to over 78 countries across Europe, South Africa, Australia, Korea, Belgium, Singapore, Italy, Egypt and the Gulf countries. With nearly 50% of RSWM's production exported, the Company has a significant presence in the world of textiles. Capability Enhancement - The Company has continuously invested in modernisation and expansion of all its business verticals. In the last five years it invested INR885 crore towards this goal. While capacity enhancement has facilitated cost-competitiveness, technology up gradation has ensured superior product quality. Footprint widening - As capacities have increased, the Company has made significant investments towards creating markets for the additional volumes. It has deepened its presence in India to cater to all textile hubs and widened its global footprint across key geographies.

15 Sustaining its growth The Company working on its value addition with focused efforts towards widening the proportion of value-added variants in its product basket in line with evolving industry trends and customer requirements. This should cement its identity as a preferred partner to discerning Indian and global brands. Even as the Company is growing in size, the management is focused on improving business efficiencies namely strengthening productivity, improving resource procurement and utilization and eliminating wastages. This costcompetitiveness is expected to sustain business operations through good times and bad Capex Driven Co channelized INR134 crore in fresh capital expenditure investments last year. It moderates the Balance Sheet on the one hand and enhances capacity on the other. The result is that when the additional capacity is implemented, the accruing returns could strengthen shareholder value. The capex proposal entailing the modernization of Fabric Unit at Banswara and Yarn division at Bagalur amounting to INR3.17 crore and INR10 crore were completed during the year thereby improving the overall productivity Debt Equity ratio coming down The Company has invested in its various business verticals; it prudently deployed surpluses in de-leveraging its financial statements. The low debt-equity and a healthy cash flow generated from operations provide the co the necessary financial muscle to implement future capital investment projects and strengthening business capabilities. The co has paid INR 500cr quantum of debt repaid in 3yrs. RoE and RoCE has taken a hit due to new capex co is taken; we believe the co needs to improve it returns over next few years.

16 Revenue growth and margins have been lagging peers we believe that with multiple initiatives there are set to improve.

17 Trident Ltd

18 Trident Ltd moving up the value chain!! Maintain Buy with a TP of INR113/sh (+31% Upside) Buy Price at 12 May 2017 (INR) Price target - 12mth (INR) week range (INR) BSE Price Performance( To ) Management expects cotton prices to moderate: Management expects bed linen utilization levels to increase to 40-50% in FY18 (29% in FY17) and terry towel utilization level at 55-60% (50% in FY17). EBITDA margin guidance for FY18-19 in the range of 18-22%. The company expects cotton prices to moderate in the coming two quarters; however, Textile margins are likely to remain flat due to currency Headwinds.The Company hedges based on order backlog and are generally exposed to spot currency for nearly 60% of its receivables. Performance (%) 1m 3m Absolute BSE Stock data Market cap (INRm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) Key Indicators (Mar-2017) ROE (%) Debt/equity (x) Book value/share (INR) Price/book (x) Net interest cover (x) Operating profit margin (%) EPS PE Ratio Shareholding Pattern (Mar-2017) 12m % Increase in capacity utilization Gradual increase in capacity utilization for Trident will result in operating leverage benefits. Company has revisited its Capex plan of Yarn Modernization Project (Rs crore) and Captive Power Project (Rs 393 crore for 60 MW) at its facility in Budni, Madhya Pradesh. Going forward, based on free cash flow generation, the Board may evaluate a Captive Power Plant at its Budni Facility in smaller phases. Integrated operations with pan global presence Trident has presence across the textile manufacturing value chain (from cotton yarn to value added home textile). This helps to bring better product portfolio to grow its business, strengthen value addition & control risk associated with raw material price fluctuation. Trident consumes ~38% of yarn internally. Company continuously focus on increasing captive consumption of yarn & expects captive consumption to reach 55%-60% at full utilization level. This incremental captive consumption could benefit company from better operational margins. Valuations; Maintain Buy with a TP of INR113/sh (+31% Upside) We derive our TP based on a average of P/E of 12x, EV/E of 7x on FY19e earnings. Key Financials FY15 FY16 FY17 FY18e FY19e Revenues 3,786 3,697 4,755 5,184 5,702 EBITDA ,025 1,120 Reported PAT EPS (INR) EBIDTA (%) PAT (%) PE (x) EV/EBITDA(x)

19 Key Financials DESCRIPTION FY14 FY15 FY16 FY17 FY18e FY19e sales 3,884 3,786 3,697 4,755 5,184 5,702 PBIDT (Excl Other Inc) ,025 1,120 PAT EPS Cash EPS Growth (%) FY14 FY15 FY16 FY17 FY18e FY19e sales 16% -3% -2% 29% 9% 10% PBIDT 29% -7% 8% 23% 12% 9% PAT 294% -39% 98% 44% 14% 19% ROCE (%) ROE (%) Market Capitalization Equity Paid Up Reserves and Surplus Net Worth Total Debt Borrowings Investments Cash and Bank balance Enterprise Value EV/E P/E Cash P/E Margins (%) FY14 FY15 FY16 FY17 FY18e FY19e PBIDTM (%) 19% 18% 20% 19% 20% 20% PATM (%) 5% 3% 6% 7% 7% 8% Key Ratios FY14 FY15 FY16 FY17 FY18e FY19e Debt/Equity Price / Book Value(x)

20 4QFY17 results were stellar Trident 4QFY17 a positive surprise. With revenues of INR1234cr (32%YoY; +9%QoQ) outperformed with a stupendous growth driving EBITDA at INR213cr (7%YoY;-6%QoQ) the EBITDA does not reflect the top-line growth as margins plummeted by - 395bps YoY to 17% on account of increased RM cost driving PAT to INR 100cr (+65% YoY; +27%QoQ) translating to an EPS of INR2/sh for 4QFY17. Total Debt has been reduced by 19% from INR3035cr in FY16 to INR2550cr in FY17 with cash generation of INR INR749cr for FY17 we believe that the company can continue to pare its debt further. The company s expects Revenue and PAT to grow at a CAGR of 17% and 35% for FY17-19E respectively on account of vertically integrated operations with pan global presence, focus on value added products, initiation to expand its presence in overseas market and More than 75% of Long Term Debt is covered under TUFS loan and hence lower interest rate. However we have factored in a conservative CAGR growth of 9.5% for Revenue and 16% for PAT for FY17-19E. DESCRIPTION Mar-17 Mar-16 YoY (%) Dec-16 QoQ (%) FY17 FY16 YoY (%) Net Sales % % % Other operating inc % 3 908% % Net Sales & Other Op Inc % % % Total Expenditure % % % PBIDT (Excl OI) % 226-6% % Other Income % 7 571% % Operating Profit % % % Interest % 28 16% % Exceptional Items 0 0 0% 0 0% 0 0 0% PBDT % % % Depreciation % 104-2% % PBT % % % Tax % 24 24% % Profit After Tax % 79 27% % Basic EPS % 2 27% % Cash EPS % 4 10% % Exp as % of sales Mar-17 Mar-16 Chg(bps) Dec-16 Chg(bps) FY17 FY16 Chg(bps) Raw Materials Opr & Mfr Exp Employee Exp Margins (%) Mar-17 Mar-16 Chg(bps) Dec-16 Chg(bps) FY17 FY16 Chg(bps) PBIDTM% (Excl OI) Tax%

21 Value added capacity Addition The company invested ~INR2700 crs, during FY14 to FY16 in setting up capacities for the future. Of the total capex ~INR1200 crs was spent on more than doubling the capacity of terry towels. Capacity in terry towels went up by 48,000 tones, taking total terry towel capacity to 90,000 tons per annum for the company. Trident has since emerged as the company with the largest terry towel capacity. The balance INR1500 crs was invested in creation of a new category, i.e. bed linens. The co setup a bed linen plant with a capacity of ~ 43 mn meters. This front-ended capacity expansion was supported with back-ended expansion of its yarn capacity. Business Transformation Trident has progressively trended its paper output towards value-addition. Five years ago, 100 per cent of its paper manufacturing capacity comprised maplitho as well as writing & printing paper. There has been a big transformation since; copier paper, fetching higher realizations over the conventional varieties, now accounts for about 50 per cent of its capacity and is projected to increase to 60 per cent to 70 per cent of all its paper output two years from now. Strong Global outlook for Home Textiles for Trident The Indian home textile industry is expected to expand at a CAGR of 8.3% during to USD8.2 billion in 2021 (from USD4.7 billion in 2014) on the back of increasing spends on premium products, higher per capita income and increasing brand awareness. The forecast for the next five years looks similar. Globally the retail value of home textiles is expected to reach USD billion (CAGR of 2.4%) in Capex has been funded by internal accruals; over the last 4years capex of ~INR3700cr has been done with no increase in debt. The company aims to prepay high-cost debt, aside from scheduled TUFS debt payments in FY18. Debt/ Equity ratio is currently at 1.2x and we expect the same to fall further.

22 Margins have been very stable and we expect company to be able to maintain the margins with ease. Trident margins are among the best in the industry; only Indocount and VTL have better margin than Trident FY17e EBITDA Company Sales EBITDA PAT EPS Margin (%) PAT Margin (%) KPR 2, RSWM 2, Indo Count 2, Vardhman 6,184 1,470 1, Banswara 1, Sutlej 2, Mandhana 1, Sangam 1, Damodar Trident 4, Gokaldas Exp 804 (10) (27) (1.2) (3.3) SP Apparels

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