Buy Trent; target of Rs 5800: Geojit Financial Services

Geojit Financial Services research report on Trent

Trent Ltd., a subsidiary of the Tata Group, manages a diverse portfolio of retail brands across the Fashion, Lifestyle, and Food & Grocery sectors. Key brands include Westside, Zudio, Star, Booker Wholesale, along with other brands such as Utsa and SAMOH. In the third quarter, Trent expanded its footprint by adding 12 Westside stores and 58 Zudio stores, bringing the total number of stores to 238 and 635, respectively. Revenue grew at 37% YoY to Rs.4,535cr in Q3FY25, led by high single-digit LFL (Like - for-Like) growth across fashion concepts, strong store additions in Zudio & Westside, and traction in emerging categories like BPC, innerwear & footwear. EBITDA margins declined by 30bps YoY to 18.5% in Q3FY25 due to a change in format mix and aggressive store additions. PAT stood at Rs.469cr, up by 37%YoY. The grocery retail business ‘Star’ (74 stores currently) grew 25% YoY in Q3FY25, driven by 10% LFL performance and strong volume metrics. Operating performance improved, driven by staples, fresh & general merchandise, and a 5% YoY increase in own brand contribution. Revenue/EBITDA/PAT are expected to grow at a CAGR of 36%/38%/42%, respectively, over FY24-26E. Rapid store expansions, traction in the grocery business, a foray into new categories like the affordable beauty segment, a fast growing lab-grown diamond category, and global store additions are the key growth catalysts ahead. As per Bloomberg consensus, the stock is currently trading at a 1 yr fwd. P/E of 86x, which is lower compared to its 3-year average of 97x and 5-year average of 118.6x.

Outlook

The stock has now approached a key support level on the multi-timeframe chart from a mid-term perspective. Hence, a bottom-fishing strategy can be utilized to accumulate the stock for a price target of around Rs. 5,800.