Buy Trent; target of Rs 6900: Motilal Oswal

Motilal Oswal's research report on Trent

Trent’s 4QFY25 revenue growth moderated to ~29% YoY (vs. 37% YoY in 3Q), as SSSG came down to a mid-single digit in 4Q (vs. high-single digit in 3Q and double digits in 2Q). However, store additions remained robust, with net store additions of 13/130 in WestSide/Zudio (up ~29% YoY). Gross margin contracted ~265bp YoY, likely due to higher discounts and rising salience of Zudio in the revenue mix. Despite weaker gross margin, Trent delivered ~11% EBITDA beat, driven by superior cost controls (employee/occupancy costs up 3%/7% YoY). Star growth also moderated with a modest ~2% LFL. Our FY26-27 estimates are broadly unchanged. We build in FY25-27E CAGR of ~25-26% in standalone revenue/EBITDA/PAT, driven by continuation of robust area additions in Zudio.

Outlook

We assign 55x Mar’27E EV/EBITDA to the standalone business (Westside and Zudio; a premium over our Retail Universe, given TRENT’s superlative growth), 2.5x FY27E EV/sales to Star JV, and ~7x EV/EBITDA to Zara JV to arrive at our TP of INR 6,900. Adjusting the value of Star and Zara, the stock is trading at 73x FY27E PE for the standalone business (vs. ~90x LT average 1-year forward PE). We reiterate our BUY rating.

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