Tata group stock: Trent shares at Rs 1,700? Analysts see up to 30% upside

Tata Group firm trent-ltd-trent-share-price-361606" target="_blank">Trent came out with a strong top line growth for the December quarter. A 20 per cent growth in profit was aided by other income; there was a marginal dilution in margin. Analysts said the store additions in FY23 so far are in line with Street expectations, adding that margin profile and revenue growth of the retailer will be keenly tracked going ahead. For now, analysts have price targets as high as Rs 1,733 on the counter, suggesting up to 30 per cent potential upside.

Trent reported a 21 per cent YoY rise in profit at Rs 161 crore on a 61 per cent YoY jump in revenue at Rs 2,171.50 crore, aided by strong growth across key brands. Westside’s like-for-like growth came in at 17 per cent YoY. Trent said the December quarter numbers are not strictly comparable on a YoY basis due to impact of rent waiver and lowering of provisioning impact. Ebitda margin came in at 15.5 per cent, down 619 basis YoY, even as margin improved 70 bps on a sequential basis.

Axis Securities said Trent’s overall results were outstanding in terms of top line growth and that it expects the strong traction to continue in coming quarters.

Trent's focus on store expansion and refreshing stores with fresh assortments will lead the overall future growth across store formats, it said, as the brokerage upped its target on the stock to Rs 1,700 from Rs 1,650, it said.

"Improving return profile across formats as reducing losses in Star Bazaar and improving traction in Inditex JV are also positive signs for the company. Over the last couple of years, Trent, with its Star food business has pursued the model of tight footprint stores, sharp pricing, and focus on fresh and own brand offerings has resulted in a positive outcome," Axis Securities said.

Nuvama has a target of Rs 1,733 on the stock. It ascribed 35 times FY25 EV/Ebitda to Trent's core standalone operations. "Trent’s scalability of Zudio and execution in both Westside and Zudio makes it our top pick," it said.

At Friday’s price of Rs 1,333.75, the target suggests a potential 30 per cent upside.

PhillipCapital noted that Trent had a total of 211 Westside and 326 Zudio stores at December-end compared to 200 Westside and 233 Zudio stores at the end of FY22 implying store addition of 104 financial year-to-date. The brokerage said performance of Trent's new stores were in-line with expectations, as it modelled Trent to end FY23 with 215 Westside and 368 Zudio stores. This brokerage has a target of Rs 1,525 on the stock.

Sharekhan said Trent’s Q3 performance was ahead of Street expectations on account of strong topline growth. Innovation in the product portfolio, scaling up of the supply chain, 100% contribution from own brands, aggressive store expansion, and leveraging on digital presence will be key growth drivers in the medium term, it said.

"We expect Trent’s revenue and PAT to report a CAGR of 43 per cent and 66 per cent, respectively, over

FY2022-FY2025E. The stock has corrected by 20 per cent from its recent high and is trading at 28 times FY23, 22 times FY24 and 18 times FY25 EV/Ebitda. With risk reward, strong growth prospects, and a lean balance sheet, we maintain our Buy recommendation on the stock," it said while suggesting a target of Rs 1,550.

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