Buy Trent; target of Rs 6650: Motilal Oswal

Motilal Oswal's research report on Trent

Trent reported revenue growth of 40% YoY, aided by footprint expansion (29%/40% YoY store/area additions) and double-digit LFL (SPSF up 4% YoY). Trent added 16/220 net Westside/Zudio stores and consolidated four other format stores to cross 1,000+ stores across its fashion formats. However, Trent’s growth rate moderated in the past few quarters due to high base and contraction in LFL growth to a mid-single digit by 4QFY25. Despite ~70bp contraction in GM, reported/pre-IND AS 116 EBITDA margin expanded ~35bp/105bp YoY, aided by operating leverage, especially on employee and rental costs (2% YoY decline to ~INR179/sqft per month). Trent’s OCF rose to ~INR10b (vs. INR7.8b YoY), driven by strong profitability, while FCF moderated to INR1.9b (vs. INR4b in FY24) due to higher capex. The company also saw an improvement in its return profile in FY25, backed by higher profitability and asset turns.

Outlook

Adjusting the value of Star and Zara, the stock is trading at 77x Jun’27E PE for the standalone business (vs. ~90x LT average 1-year forward PE). We reiterate our BUY rating.

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