Trent shares rise as HSBC initiates coverage with 'buy' rating; sees 17% upside

Trent shares are down nearly 20 percent since the beginning of the year.

Shares of Tata-owned apparel giant Trent Ltd rose more than a percent on June 20 after notching a third bullish call in as many days, with HSBC initiating coverage with a ‘buy’ rating. The brokerage sees strong growth ahead, driven by the rapid expansion of its value fashion brand Zudio.

With a price target of Rs 6,700, analysts are implying an upside potential of 17 percent from the last close at Rs 5,723 on the NSE. The brokerage expects Zudio to add around 200 stores annually between FY25 and FY28, driving the company’s expansion.

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The international brokerage sees low competition risk in this segment and believes the reimagined Westside format, along with Zudio Beauty, will further support growth. HSBC also highlights that Trent’s price-to-earnings ratio of 2.4x is lower than peers like Vishal and Page Industries, despite stronger growth and profitability.

It isn't just HSBC; yesterday, Macquarie retained its ‘Outperform’ rating, citing the company’s ambitious plans to clock 25 percent annual sales growth over the next decade through new store openings, entry into adjacent categories, and tighter cost controls.

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On Tuesday, Morgan Stanley reaffirmed its ‘Overweight’ view on the stock on June 18. The brokerage noted the management’s continued confidence in achieving its 10x growth goal by FY32, balancing expansion with profitability. The company's plan to expand store count by 200 per year is possibly doable while ensuring quality, economics and location, the report quoted the brokerage as saying. It added that Trent's new stores reach very high throughput within 12-24 months of opening.

The bullish sentiment follows a solid Q4 performance. Trent posted a 37 percent year-on-year jump in EBITDA to Rs 656 crore, well ahead of market expectations of Rs 580 crore. Margins also improved to 16 percent.

Trent shares are down nearly 20 percent since the beginning of the year.

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