Multibagger Tata Group stock rises 7%, hits record high as Morgan Stanley maintains overweight call

Shares of Trent Ltd rose 7% in early deals on Tuesday after international brokerage Morgan Stanley maintained its 'overweight' call on the Tata Group's subsidiary. Trent shares gained 6.78% to a record high of Rs 7,955 in early deals today.  It has seen low volatility in the last one year with its beta at 0.8. Total 0.24 lakh shares of the firm changed hands amounting to a turnover of Rs 18.40 crore on BSE. Market cap of the firm stood at Rs 2.80 lakh crore on BSE. The Tata Group's multibagger stock hit a 52-week low of Rs 1946.5 on October 26, 2023.

The multibagger stock is neither overbought nor oversold on charts as the relative strength index (RSI) of the stock stands at 56.5. Shares of Trent are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages which means they are trading in bullish zone in both long and short terms.

The rally in the stock also comes amid reports that it launched a new standalone store format, Zudio Beauty, marking its entry into the mass-priced beauty segment. This launch places Zudio Beauty in direct competition with established players such as Hindustan Unilever's Elle18, Sugar Cosmetics, Health & Glow and Colorbar. The new launch has strengthened the brokerage's conviction.

Meanwhile, Morgan Stanley has a price target of Rs 8,032 per share on Trent.

The BPC sales contribution was already quite material in Westside and Zudio stores. Zudio's BPC business had built scale over time, as customers have become more indulgent and impulsive, said the brokerage.

In September end, global brokerage Citi initiated coverage on the Tata Group stock with a 'buy' call. It assigned a price target of Rs 9,250 on the retail stock. It has included the stock in its Pan-Asia high-conviction focus list.

The Tata Group stock has risen 444% in two years and gained 281% in a year. The stock has delivered 615% returns in three years.

Brokerage Citi said Trent is leveraging its supply chain and insights from Westside and Zudio, turning around its Star Bazaar business. Trent is well-positioned to scale up its other pilot projects, such as MISBU, Samoh, and its joint venture with MAS, said the brokerage.

The brokerage said the firm has transformed from a single-format to a multi-format player, which led to a 36 percent revenue CAGR from FY19 to FY24. As a multi-category player in fashion, lifestyle, grocery, and personal care, Trent reported industry-leading revenue, EBITDA, and PAT CAGRs of 41 percent, 44 percent, and 56 percent, respectively, for FY24–27.

Trent logged a 225% year-on-year rise in consolidated net profit for the June quarter. Net profit climbed to Rs 391 crore in Q1 against net profit of Rs 167 crore in the corresponding quarter of last fiscal. Revenues rose 56% to Rs 4104 crore compared to Rs 2628 crore in the corresponding quarter a year ago.

EBITDA or earnings before interest, taxes, depreciation and amortisation zoomed 199% on-year to Rs 400 crore against Rs 266 crore in the year-ago quarter.

Trent Limited is part of the Tata Group and operates a portfolio of retail concepts. The primary customer propositions of Trent include Westside, one of India's leading chains of fashion retail stores, Zudio, a one stop destination for great fashion at great value and Star, which operates in the competitive food, grocery and daily needs segment.