Trent Vs Zomato: These two Nifty Next 50 stocks rallied over 100% in 2024; which stock to buy now?

Two stocks in the Nifty Next 50 index rallied over 100% amid the ongoing outperformance on a year-to-date basis. These are retail major Trent and food delivery platform Zomato.
 
Shares of Trent have surged 127% to Rs 6,925.60 on August 26, 2024 from Rs 3054.95 on December 29 last year. The company will be included in the Nifty50 index with effect from September 30. Brokerage Axis Securities is bullish on Trent with a target price of Rs 7,000.
 
Of late, Trent reported a 126.29% year-on-year rise in consolidated net profit at Rs 392.58 crore for the quarter ended June 2024. The figure stood at Rs 173.48 crore for the corresponding quarter last year.
 
According to Axis Securities, Trent’s Q1FY25 numbers exceeded expectations. The company achieved robust revenue growth (up 57% YoY), driven by increased footfalls, and strong performance across brands, concepts, categories, and channels, despite subdued market sentiments and heightened competitive intensity.
 
“Trent now operates 228 Westside stores and 559 Zudio stores across 178 cities. We believe Trent’s overall revenue growth results are excellent, and we anticipate continued strong performance in the coming quarters. The company’s focus on store expansion and product assortment will likely drive future growth across all store formats,” Axis Securities said in a report.
 
Dalal & Broacha Stock Broking advised investors to adopt the ‘Buy on Dips’ strategy for Trent. The brokerage said Trent stood as an outperformer in the entire retail apparel space where everyone is struggling. “With aggressive store expansion, right product mix we expect this business to consistently deliver CAGR of over 25% for a couple of years,” the brokerage said.
 
On the other hand, Zomato gained 110% to Rs 259.39 from Rs 123.70 during the same period. The company reported a manifold rise in net profit at Rs 253 crore in Q1FY25 over Rs 2 crore in Q1FY24. Morgan Stanley has a ‘Buy’ rating on Zomato with a target price of Rs 278.
 
In the latest development, Zomato will acquire One97 Communication owned-Paytm’s entertainment and ticketing business for Rs 2,048 crore. The food delivery giant looks to expand its presence in the ‘going-out’ segment, while the embattled fintech major seeks to focus on its core financial services offerings.
 
“We take this transaction as a net positive for Zomato. Our positive view is driven by a boost to going out business of Zomato, acquisition a profitable and asset-light business (positive working capital. though), scope for large value creation versus current value assigned and prudent capital allocation,” Morgan Stanley said in a release.
 
Japanese brokerage firm Nomura is also positive on Zomato with a price target of Rs 280. “We have not incorporated the newly-acquired business in our model pending the deal closure. We think the key drivers for Zomato’s share price in the near term are the continuing growth momentum in the quick commerce business (we expect 100% CAGR in GOV over FY24-26F) while the food delivery business clocks steady 20-25% annual growth in the medium term,” Nomura said.
 
With a rally of 40%, the Nifty Next 50 index outpaced the benchmark NSE Nifty 50 index (up 15% YTD) in 2024 so far. The Nifty Midcap 150 and Nifty Smallcap 250 indices have gained 27% and 28%, respectively, during the same period.
 
Data further highlighted that shares of Samvardhana Motherson International, Indian Railway Finance Corporation, Vedanta, Siemens, Hindustan Aeronautics, ABB India, Bharat Electronics, Zydus Lifesciences and Interglobe Aviation stood among other major gainers with a rally over 50% YTD. Bharat Electronics will also be included in the Nifty 50 index, effective September 30.