Buy Trent Ltd; target of Rs 310: ICICI Direct

ICICI Direct's research report on Trent Ltd

Standalone revenues for Q1FY18 (which includes Westside and Landmark formats) grew 25% YoY (up 10% QoQ) to Rs 499.2 crore (I - direct estimate: Rs 455.3 crore. LTL growth for Westside was at 14%.  During the quarter, Westside opened three stores taking the total count (excluding closures) to 111 stores as on Q1FY18 Better inventory management has led to a 70 bps improvement in gross margins to 55% in Q1FY18 compared to 54.3% in Q1FY16. Moreover, controlled other operating expenses accelerated the improvement in EBITDA margins, which improved 280 bps YoY to 11.7% (I - direct estimate: 8.2%).

Outlook

Though expensive, the valuations capture Trent’s franchisee quality. We maintain BUY rating on the stock with a revise d target price of Rs 310. For all recommendations report, click here

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