Business

Best Play On Textile Sector? Trident And Indo Count, Say Market Experts

Increased global awareness on health and hygiene and work from home trends owing to the growing worries about the new SARS-COV-2 variant Omicron are seen augmenting demand for home textile companies. Several analysts have identified Trident and Indo Count Industries as the best play on the textile sector at this juncture. Trident shares have zoomed nearly 690% in the past three years and Indo Count's stock jumped 345% during the same period. Technical analysts see further gains of about 20-35% in these stocks. As worries over the spread of the new Covid-19 variant Omicron grow, increased global awareness on health and hygiene and work from home trends are seen augmenting demand for home textile companies. Several analysts have identified Trident and Indo Count Industries as the best play on the textile sector at this point. In the past year, shares of Trident soared over 400% while those of Indo Count gained close to 60%. The former zoomed near 690% in the past three years and the latter jumped 345% during the same period. The Punjab-headquartered company, Trident, reported its highest-ever quarterly revenue in Q2 FY22 amounting to Rs 16,726.7 million and also posted its highest-ever quarterly net profit of Rs 2,288 million in Q2 FY22 with a notable 15 percent sequential fall in net debt. Indo Count’s consolidated net sales came in at Rs 738.71 crore in the quarter ended September 2021 which was up 2% Year-on-Year (YoY). While quarterly net profit stood at Rs 84.87 crore, up nearly 4% YoY. Recently, the bedding solution provider acquired home textile business of GHCL. With this, ICICI Direct Research believes Indo Count would become the largest home textile bedding company globally, with an annual capacity of around 153 million metres. This acquisition could incrementally add potential revenue of Rs 1,300-1,500 crore over the next two to three years, the brokerage said. “As a sector, we do see home textile as an investment bet due to the Covid effect and consequent pent up demand. India is not just amongst the largest producers but also the largest consumer of home textiles. In fact, as per our data, our nation is the second largest producer of home textile with a 6.9% share in the entire global market,” Salonee Desai, Head of Research, Moat Financial Services. “So we’re definitely betting on the sector as a whole through individual companies like Trident and Indo Count,” Desai added. Further, she believes the sector is undervalued which makes these stocks attractive. Some analysts are of the opinion that the uniform 12% GST rate on manmade fibre, yarn, fabrics and apparel would further support earnings per share numbers and cash profits eventually leading to higher valuations for Trident and Indo Count. Meanwhile, Nirav Karkera, Head of Research at Fisdom, says that there are more developments in favour of the home textile segment versus downside risks which largely emanates from the profitability of a resurging pandemic. “As home furnishing retail sales pick up in the US and Europe especially during the upcoming festivities, we can expect domestic manufacturers to scale operations aggressively in response,” Karkera explained. From a medium to long term perspective, the 'China plus One' play could augur well for Indian home textile exporters, Karkera firmly believes. Several market participants also said that the US banning import of cotton products from China’s Xinjiang region will benefit Indian textile companies. “The US and the European Union are the two largest markets for Indian textile exporters, followed by various Asian countries and the Middle East. With the ban, China and Pakistan both have lost around 5% market share in US cotton sheets since 2020,” said Neha Nagar, Financial Influencer and Founder of Taxationhelp.in. India’s market share in US cotton sheets has increased to 59% from January to August 2021. In the terry towel segment, India’s share has risen by 200 basis points to 44% in CY21 till October end, Motilal Oswal Financial Services said citing Office of Textiles and Apparel data. This industry will see its revenue shooting up because of easing logistics issues, global work from home trends and growth in exports, Nagar added. For Indo Count, the scrip could rally up to Rs 350 which means a 36% upside from the current level of Rs 258. Treat Rs 220, a level which provides strong support to the stock, as the stop loss level, said Kkunal Parar, Vice-President Research at Choice Broking. He said that Trident shares could gain another 22% from the current level of Rs 49. Parar added that the stock will take support at Rs 44.