Sharekhan's research report on Trent
In our retail universe, Trent registered consistent strong performance for the past three years (FY2020-23) with revenues and PAT clocking CAGRs of 34%/53% backed by strong store expansions and consistent double-digit SSSG. With working capital cycle shrinking and capex allocation turning efficient, free cash flows stood at Rs. 450 crore in FY2023. OCF to EBIDTA improved to 59% in FY2023 from 39% in FY2020. Return profile improved with RoE and RoCE increasing to 19.1% and 14.5% in FY2023 as against 7.4% and 13.8% in FY2020, as Westside brand’s performance improved.
Outlook
We re-iterate our Buy rating on Trent with a revised PT of Rs. 2,025. Consistent double-digit same-store-sales growth (SSSG) that beats peers and well-defined store expansion strategy provide stable earnings visibility. Stock trades at 32.2x/26.2x its FY2024E/25E EV/EBITDA.
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