Edelweiss is bullish on TRENT has recommended buy rating on the stock with a target price of Rs 392 in its research report dated May 04, 2018.
Edelweiss' research report on TRENT
Trent’s Q4FY18 standalone revenue and EBITDA growth of 16.4% YoY and 78.3% YoY came in line, while PAT at INR117mn surpassed estimate. Revenue from Westside for FY18 came in at 20% YoY with SSSG growth of 9% YoY. Star Market format has crystallised and focus now is on rolling out a range of own merchandise. Management is very optimistic on the Zudio format and expanded its store network to seven in FY18 from one in FY17. Losses of JV increased from INR89.7mn in FY17 to INR226.5mn in FY18. Factoring slower turnaround in JV’s, we prune estimates by 18.4%/13.2% for FY19/20E. We still expect Trent to report ~65% EPS CAGR over FY17-20E. Maintain ‘BUY’.
Trent provides a unique opportunity to invest in three power brands—Westside, Star Bazaar and Zara. With a potential turnaround of JV’s, we expect Trent to clock ~65% EPS CAGR over FY17-20E. Our SOTP valuation assigns EV/EBITDA of 25x FY20E to Westside business, EV/EBITDA of 15x FY20E to Zara business and P/sales of 1.5x FY20E to Star Bazaar to arrive at target price of INR392. The stock is currently trading at 29.0x FY20E EV/EBITDA. Maintain ‘BUY/SO’.
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