This richly-priced Tata Group stock saw its biggest fall ever: Is the worst behind it?

This richly-priced Tata Group stock saw its biggest fall ever: Is the worst behind it?

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

A quarterly business update that did not meet street estimates has dented the share price of richly-valued, leading apparel retailer – Trent – on April 7, sending it lower by 19% to its steepest fall since June 2024, extending the slump for a third session and erasing over Rs 30,000 crore in market capitalisation.

Is the stock 'overvalued'? Data charts reveal 

Despite strong long-term expectations, analysts reveal that Trent recently under-delivered on sales growth, especially at Zudio. Therefore, current prices may be front-loading future performance. As a consensus, analysts are calling it 'overvalued' in a scenario where the Indian equity market is still grappling with slowdown following weak Q4 earnings, tariff impact and continued FII sell-off.

(Source: Bloomberg)

Trent’s sharp revenue jump of 51% in the third quarter of FY25 prompted investors to assign a premium compared to DMart. Though the fourth quarter saw a slowdown in Trent's performance (provisional data reflects 28% revenue growth), analyst are penciling in a rebound in Trent's growth momentum.

Another peer, ABFRL trades at a similar forward P/E as Trent, but with much lower revenue momentum, potentially signaling over-optimism in the share price. V2 Retail, despite negative growth this quarter, is valued conservatively — underscoring a growth-at-any-price bias toward larger players like Trent.

(Source: Bloomberg)

Trent’s P/E is 2x Nifty, underscoring a premium compared to peers, despite that, its returns (21.3%) lag behind both FMCG index as well as Nifty. The P/B too is stretched, showing it trades far above asset value. On the other hand, a subdued demand environment in Q3FY25 saw value retail emerge as a lucrative space compared to other sectors.

Bloomberg data mentions the stock's 'Beta' as 0.92 whereas a beta higher than 1 reflects volatility. Thus, reflecting that even in a volatile environment such as in the present scenario, it is moving more like a stable consumer company.

What has changed for Trent?

The quick reversal in sentiment has come despite Trent reporting a healthy 28% on-year revenue growth for the March quarter. Trent stock price has corrected 46% from its all-time high of Rs 8,345, hit on October 14, 2024.

“When expectations are high - the probability of disappointment is higher - and that’s what happened when Trent’s business update was published”, said market expert Ambareesh Baliga. “It’s still expensive compared to the other retail stocks in the market. It was the most sought-after stock due to its growth projection, especially of Zudio stores, but with the market correction, investors are re-evaluating the options,” Baliga said.

A broader cooling off in urban discretionary spending may also be one of the reasons behind the severe stock reaction, some analysts have said.

Trent’s March quarter sales growth - at 28% on year – appears healthy on face value, but lower than the Street's expectations and a step down from the 37% growth seen in Q3FY25. The quarter-on-quarter decline of 9.7% stood out for analysts, given that the March quarter typically sees a smaller seasonal drop. The 4Q update indicates -9.7% QoQ sales decline, which points to weakness in demand or aggressive discounting to clear inventory.

Street Signs - Good, Bad, Ugly

(Source: Bloomberg)

Kotak Securities had expected a 36% revenue growth for the quarter, thus making the print a miss on expectations. Pankaj Kumar, VP–Fundamental Research at Kotak Securities flagged a deceleration in growth through the year at trent. “After a robust 57% YoY revenue growth in Q1FY25, the revenue growth has decelerated to 37% in Q3FY25… The recent results trajectory has been weaker than the past,” he said.

The brokerage has downgraded Trent to ‘Reduce’ with a fair value of Rs 5,150 after lowering its previous target of Rs 5,550.

Goldman Sachs remains constructive with a ‘Buy’ and a lower target price of Rs 6,760 (from Rs 7,500 earlier), however, the note said Trent’s strategy of new stores in the same catchment areas is impacting the Like-for-Like (LFL) growth. “By design, footfalls from mature stores are shifting to new ones, which affects the same-store growth figure even if total area sales improve. This strategy deliberately diverts footfall from the existing store to the new store, hence impacting LFL but maximising sales from the catchment,” Goldman Sachs said.

Despite the near-term moderation, analysts continue to view its apparel brand Zudio as a strong long-term growth lever for Trent. Goldman Sachs said it expects Zudio’s market share to grow from ~1% to ~5% over FY24–35, driven by its cost structure and store economics.

One added potential tailwind for Trent could be the government's targeted income tax cuts effective, April 2025, which could raise disposable income for Zudio’s target customer segment. Goldman Sachs sees a significant overlap between this income level cohort and the target customer base of Zudio.

Morgan Stanley continues to be bullish on Trent with a significant upside potential of 29% from the pre-crash levels, and has rated the stock ‘Overweight’, expecting it to outperform peers over the medium term.

Motilal Oswal too came out with a recent note that maintained Overweight stance on discretionary stocks, including Trent, indicating continued confidence despite recent volatility. MOSL has maintained a ‘Buy’ with a target price of Rs 6,800 on Trent.

Trent On the Charts - Near key support

Ajit Mishra, SVP- Research at Religare Broking said Trent has been trading with a corrective bias over the past six months, and has retreated from record high of 8,345 on November 10, 2024, to hit a low of 4,488 on April 7, 2025. The stock has now approached a crucial support level — the 100-week exponential moving average.

Mishra explained that Trent is currently seeing profit taking after a phenomenal performance phase, which could extend if the stock fails to hold the level of 4660. Religare has pegged the next support zone between Rs 3,750 and Rs 4,100.

Osho Krishan, Senior Analyst of Angel One said the current performance reveals a bearish structure (lower highs and sharp pullbacks). “A correction below the Rs 4,500 subzone could be devastating from a technical perspective,” he said, with short-term resistance seen around Rs 5,000 to Rs 5,500

Down, but not out?

For now, Trent’s near-term outlook may remain under pressure as investors digest the weaker-than-expected quarterly update and reprice its rich valuations. But several long-term bulls remain undeterred, betting on the structural growth story of Zudio and Trent’s aggressive expansion strategy.