Trent shares reached a fresh peak of Rs 3,849.75, rising by 7 percent on the BSE during Thursday’s trading session with significant trading volumes. Over the last two trading days, the Tata Group subsidiary has surged by 27 percent following its announcement of a more than twofold increase in net profit to Rs 343.60 crore for the December quarter (Q3FY24), driven by robust operational performance. In the corresponding quarter of the previous year (Q3FY23), the company, which operates various retail concepts, recorded a net profit of Rs 160.92 crore.
Trent’s standalone revenue experienced a significant 52 percent year-on-year (YoY) growth, reaching Rs 3,521 crore compared to Rs 2,319 crore in the corresponding quarter of the previous year. Additionally, the operating earnings before interest and tax (EBIT) margin saw an improvement to 13 percent in Q3FY24 from 8.5 percent in Q3FY23.
Trent’s impressive revenue growth, fueled by strong Store Sales Growth (SSSG) and productivity gains, as well as robust expansion of its footprint, particularly within the Zudio segment, provides significant growth opportunities over the next three to five years. In Q3FY24, the company’s fashion concepts witnessed notable Like-for-Like (LFL) growth of over 10 percent compared to Q3FY23. During the quarter, Trent added 5 Westside and 50 Zudio stores across 36 cities, including 13 new cities. This expansion, coupled with favorable raw material (RM) costs, contributed to an improvement in gross margins. At 10:06 am, Trent’s stock was trading 6 percent higher at Rs 3,811.30, outperforming the 0.18 percent rise in the S&P BSE Sensex. Trading volumes on the counter surged more than fivefold, with a combined 3.56 million equity shares, representing 1 percent of Trent’s total equity, changing hands on the NSE and BSE.
Trent soars 27% in two days, reaching a new high on strong Q3 results.
Motilal Oswal Financial Services (MOFSL) highlights Trent’s exceptional performance, characterized by a 10 percent Like-for-Like (LFL) growth and significant expansion of its footprint, which stands out amidst a challenging demand environment in the retail sector. While other companies in its sector passed on the sharp increases in raw material (RM) prices last fiscal year, Trent chose to absorb the impact, resulting in strong customer acceptance. Now, as RM prices stabilize, Trent is reaping the benefits, according to the brokerage firm’s result update. Additionally, Trent’s grocery segment, Star, comprising 67 stores with an annualized revenue of Rs 2,690 crore (FY24E), is experiencing robust LFL growth. This indicates a substantial growth opportunity for the company. Furthermore, MOFSL notes that Trent’s own brand strategy and carefully curated range are resonating well with customers.
In its result update, the brokerage firm stated that it assigned 45x EV/EBITDA to Westside and Zudio, its independent business (which is a premium over our Retail Universe due to its exceptional growth), 2x EV/sales to Star Bazaar, and 15x EV/EBITDA to Zara on FY26E. Based on these calculations, the brokerage firm arrived at a target price of Rs 4,200.
