Buy Trent; target of Rs 8200: Motilal Oswal

Motilal Oswal's research report on Trent

Trent Ltd (TRENT) continued to buck the weak consumer sentiment trends, delivering robust ~40% YoY revenue (though weaker than 50%+ YoY in the past few quarters) and 46% YoY PAT growth in 2Q. Star business continued its strong growth momentum with ~27% YoY growth on robust 14% LFL growth. However, revenue/EBITDA were 6-8% below our estimates on account of significant store consolidation (net 8 store additions). We lower FY25-26E revenue/EBITDA by 5-6%, while PAT is largely unchanged. We build in FY24-27 CAGR of 34%/37%/30% in standalone revenue/EBITDA/PAT, driven by strong store additions and healthy SSSG. We assign 60x Dec’26 EV/EBITDA to the standalone business (Westside and Zudio; a premium over our Retail Universe, given TRENT’s superlative growth), 3x Dec’26 EV/sales to Star JV, and 8x EV/EBITDA to Zara JV to arrive at our TP of INR8,200. Adjusting the value of Star and Zara, the stock is trading at 75x Dec’26 PE for the Standalone business (vs. 88x LT average 1-year forward PE). We reiterate our BUY rating.

Outlook

We assign 60x Dec’26 EV/EBITDA to the standalone business (Westside and Zudio; premium over our Retail Universe, given its superlative growth), 3x Dec’26 EV/sales to Star JV, and 8x EV/EBITDA to Zara JV to arrive at our TP of INR8,200. Adjusting the value of Star and Zara, the stock is trading at 75x Dec’26 PE for the Standalone business (vs. 88x LT average 1-year forward PE). We reiterate our BUY rating.