Trent Q1 results today: Earnings expectations, key things to watch, target prices

Trent Ltd is likely to report a flattish net profit for the June quarter on a 19 per cent year-on-year (YoY) growth in net sales. Ahead of its quarterly results, the Tata group stock had 20 'Buy' calls, five 'Hold' recommendations and two 'Sell' ratings, with the Bloomberg consensus target of Rs 3,218 implying a modest rise from here on.

Axis Securities said it sees Trent reporting 0.4 per cent YoY rise in net profit at Rs 424 crore compared with Rs 423 crore YoY. Net sales is estimated to rise 19 per cent YoY to Rs 5,690 crore  compared with Rs 4,781 crore, led by a rapid store expansion in Tier 2 and Tier 3 cities. Ebitda is seen rising 13 per cent YoY to Rs 947 crore, but EBITDA margins are expected to decline 88 basis points YoY to 16.6 per cent due to supply-side inflation, rising crude derivatives costs and the aggressive scaling of the lower-margin Star Bazaar format.

Trent in an earlier update reported revenue growth of 19 per cent. HDFC Securities is estimating  19 per cent growth for Westside and 18 per cent YoY growth for Zudio. It is building in a flat gross margin at 45.1 per cent YoY as higher salience of Westside in the mix is likely to be offset by crude-linked material inflation. Ebitda margin is seen at 18 per cent, up 50 bps YoY.

Nuvama is seeing 1.3 per cent degrowth in standalone net profit at Rs 417 crore on 18.5 per cent YoY rise in sales at Rs 5,666 crore. It expects Ebitda margin to compress given the higher cost of new leases and slower productivity. "The lower productivity can also impact the margins as most of the cost optimisations are in the base now and there could be some pressure from the RM inflation as well in the quarter," it said.

Kotak Institutional Equities said Trent's revenue growth will be driven by around 10 new store additions in Zudio sequentially, partially offset by a 7 per cent YoY decline in revenue per square foot.

"We expect revenue growth to lag area growth on account of cannibalization of revenues of older stores by new stores as well as incremental addition of stores in Tier II/III cities. We expect gross margin to stay flat YoY and operating leverage in other operating costs may result in YoY Ebitda margin expansion despite weak SSSG," it said.

Trent target prices

Goldmnan Sachs on August 4 suggested a 'Neutral' on Trent with a target of Rs 2,886 apiece. Earlier on July 24, AMbit Capital suggested 'Buy' and a target of Rs 3,520 on the stock. Bernstein on July 17 gave 'Outperform' rating to Trent with a target of Rs 3,500. HDFC Research finds the stock worthy of Rs 3,000 while Jefferiees sees it at Rs 3,110.