Tata stock: Trent shares jumped 4% today. Can this new Nifty constituent deliver? 

Snapping a three-day losing run, shares of Trent Ltd climbed 4 per cent in Wednesday's trade to reclaim the Rs 7,100 level mark. The scrip gained as foreign brokearge Bernstein initiated coverage on seven retail and restaurant sector stocks, with four 'Outperform' ratings, including Trent. Bernstein suggested a target price of Rs 8,100 on the Tata group stock.

On Wednesday, Trent shares rose 3.7 per cent to hit a high of Rs 7,129 on BSE. Bernstein's target of Rs 8,100 suggests a 14 per cent upside over this price. To recall, Trent would be added to the Nifty 50 index and the adjustment will take place on September 27. As per Nuvama, Trent could see inflows to the tune of $647 million due to the index inclusion. 

Bernstein said Trent has firmly established itself as the fastest growing and most profitable apparel retailer in India. It is riding high on success in three core areas namely Westside (department stores), Zudio (value fast-fashion) and Star (Supermarkets), the foreign brokerage said.

"We debated internally the sustainability of its high Zudio store growth, only recently improved margin performance and high valuations (143 times P/E). However, we are convinced that Zudio still has a runway of 5+ years for store addition at current pace before it needs to slow down materially and the operational excellence is not a flash in the pan (5-year average cash-conversion cycle of 25 days)," Bernstein added. 

 The Trent stock is up a solid 136 per cent in 2024 so far, as the Tata group firm continued to report strong performance despite weak consumption pattern reported by other retailers. That said, the scrip has breached target prices of a couple of brokerages. 

The continued momentum in Star and improving store metrics offer further upside potential, MOFSL said as it reiterated 'Buy' rating on August 12 with a revised target price of Rs 7,040, given Trent strong growth opportunity going forward. This target price got broken now.

"Profitability continued to improve due to operating leverage and better cost control. In Q1, store addition was muted with net 14 stores of Zudio being added and net four Westside stores being closed; election and the extreme heat wave could be the reasons. However, we expect Trent to add 200/ 20 stores of Zudio/ Westside during FY25. Star Bazaar’s performance continues to improve," Antique Stock Broking said earlier this month. 

It revised its target price on Trent to Rs 7,075 but this target price also got broken today.