Trent shares up 7%; Q4 show warrants stock re-rating, say analysts; price targets & more

Shares of Trent rallied over 6 per cent in Tuesday's trade following a beat on March quarter results. Amidst the apparel slowdown, anlaysts said Trent remains an anomaly as it continues to surprise positively both on top line and margins. The "all round outperformance" warrants stock re-rating, analysts said as they upped earnings estimates for FY25 and FY26 and, thus, share price targets for the Tata group firm, hoping for a sustained healthy growth ahead.

Antique Stock Broking said Trent's Q4 sales, Ebitda and profit after tax beat its  expectations by 5 per cent, 22 per cent and 45 per cent, respectively. This was led by aggressive store expansion (of Zudio) and like-for-like 10 per cent growth in overall fashion, indicating strong  performance of Westside in a challenging environment.

"Our store visits indicate to refurbishment of Westside stores being instrumental. Surprisingly, despite the evidently sharp increase in sales contribution of low gross-margin Zudio, overall gross margin expanded 449 bps during 4QFY24 (higher full price sell through and better-margin product offerings could be the reason)," it said while upgrading the stock to 'Buy' with a revised target of Rs 4,876 from Rs 3,771 earlier.

On Tuesday, the stock rose 7.31 per cent to hit a high of Rs 4,669.95 on BSE.

Unlike peers that passed on the sharp raw material price increases last fiscal, Trent absorbed the impact, seeing strong customer reception, and is now reaping the benefits as raw material prices turn benign, said Motilal Oswal. This brokerage suggested a revised target Rs 4,870, given Trent's strong growth opportunity ahead.

Philip Capital said Trent continues to be its top stock pick as the Tata firm consistently delivered industry-leading performance in the apparel segment.

Trent, it said, continues to command premium valuation on account of expected revenue/Ebitda CAGR of 36 per cent/35 per cent over FY24-26, high option-value from new businesses like Samoh and Misbu, and turnaround in Star grocery business couple. This is in addition to healthy cash generation, solid balance sheet and higher return ratios, it said.

This brokerage finds the stock worth Rs 4,771. Higher gross margins drove 5 per cent PAT upgrade from Nuvama as it rolled over its estimates to suggest a revised target price of Rs 4,926 from Rs 4,304 earlier. Maintain ‘BUY’.