Trent shares: Zudio drives strong growth but stock analysts cut target prices; here's why

Despite a 34 per cent surge in the December quarter profit on strong addition in Zudio stores, Trent's Q3 numbers missed analyst growth estimates marginally on sales, Ebitda and profit. Analysts said the base is becoming high for the Tata group retailer, following a strong double-digit like-for-like (LFL) growth and aggressive store additions recently, resulting in a moderation of growth momentum.

A few analysts cut target prices for Trent but said Trent's performance remains strong on an absolute basis and the company would continue to significantly outperform peers over the medium to long term.

"Despite slowing to under 40 per cent due to store consolidation and weak consumer spending, Trent's Q3FY25 growth remains industry-leading. LFL growth was in high-single-digit, down from previous double-digit growth. While Trent's 76 new Westside/Zudio stores in Q3 are a positive sign, upgrades and consolidations in upcoming quarters may limit overall net store growth," Nuvama said.

Accounting for softness in growth momentum, it tweaked its revenue estimates and suggested a revised target price of Rs 6,662 against Rs 7,475 earlier, but maintained ‘Buy’ on the stock.

Post the Q3FY25 performance and factoring in a slight moderation in growth momentum, Antique Stock Broking cut its Ebitda forecast for Trent by 4-7 per cent for FY25-27. It maintained its 'Buy' recommendation on Trent with a revised target of Rs 7,363 from Rs 7,642 earlier, based on FY27E SoTP valuation.

"We assign 55 times March 2027 EV/Ebitda to the standalone business -- Westside and Zudio. This is a premium over our retail universe, given Trent's superlative growth. We arrive at our target price of Rs 7,350. Adjusting the value of Star and Zara, the stock is trading at 65 times FY27 PE for the standalone business. We reiterate our BUY rating," MOFSL said.

While Trent's 76 new Westside and Zudio stores in Q3 are a positive sign, upgrades and consolidations in upcoming quarters may limit overall net store growth, Nuvama said.

The retailer reported a 33.94 per cent year-on-year (YoY) rise in consolidated net profit at Rs 496.54 crore in for third quarter compared with Rs 370.64 crore in the same quarter last year. Revenue for the quarter was up 36 per cent YoY at Rs 4,803 crore from Rs 3,521 crore YoY, the Tata group firm told stock exchanges.