Buy Trent; target of Rs 7350: Motilal Oswal

Motilal Oswal's research report on Trent

Trent Ltd (TRENT) delivered yet another robust quarter, albeit slightly weaker than our high expectations.  Revenue grew ~37% YoY (2% miss) as a pick-up in Zudio store openings (58 net store openings vs. 18 QoQ) was offset by a slight moderation in SSSG to high single digits (from double digits in 2Q). PAT rose ~37% YoY, though it missed our estimate by ~14% on account of a sharp 52% YoY increase in depreciation (+25% QoQ). Star business continued its strong growth momentum, with ~25% YoY growth, led by a robust 10% LFL growth. We cut our FY25-26E EBITDA by 2-4% and PAT by 7-8%. We build in FY24- 27 standalone revenue/EBITDA/PAT CAGR of 32%/34%/39%, driven by robust area additions and mid-single-digit productivity improvements.

Outlook

We assign 55x Mar’27 EV/EBITDA to the standalone business (Westside and Zudio; a premium over our Retail Universe, given TRENT’s superlative growth), ~3x FY27 EV/sales to Star JV, and 7x EV/EBITDA to Zara JV to arrive at our TP of INR7,350. Adjusting the value of Star and Zara, the stock is trading at 65x FY27 PE for the standalone business (vs. ~90x LT average 1- year forward PE). We reiterate our BUY rating.

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