Trent shares: Rs 2,950 or Rs 4,450? Valuations demanding, but is the stock still a Buy?

A majority of the 14 brokerages that revisited their target prices on Trent Ltd after its June quarter results retained 'Buy' ratings on the stock, although a few said the Tata Group retailer's valuations remain demanding. Among foreign brokerages, Macquarie and Bernstein suggested 'Outperform' with targets of Rs 3,600 and Rs 3,500, respectively. UBS suggested 'Buy' with higher target of Rs 3,800 from Rs 3,633 earlier. HSBC suggested 'Buy', raising its target marginally to Rs 3,390 from Rs 3,370. Morgan Stanley recommended 'overweight' with a target of Rs 3,406 apiece.

The consensus target for Trent stands at Rs 3,454, implying at 11.2 per cent upside.

Analysts said Trent continued to prioritise cluster-level revenue growth and increasing its market share in key micro-markets over store-level like-for-like (LFL) growth. The focus remained on deepening penetration in Zudio while ramping up store additions in Westside, they said.

The highest target on the stock stands at Rs 4,455 by Antique Stock Broking. The lowest target at Rs 2,950 is by Citi. This brokerage has a 'Sell' call on the stock, the only such recommendation among 14 brokerages.

Despite emerging raw material inflation and supply chain risks, Trent delivered another quarter of strong margin expansion, MOFSL said noting that the management expects supply chain initiatives, supplier engagement, and calibrated pricing to help preserve the margins.

"While valuations remain demanding at 62 times FY28 EPS, sustained execution on store expansion, driving market share gains with potential upside on margins, and the scaling of emerging categories keep us constructive," it said while suggesting 'Buy' and a target of Rs 3,775 on the stock.

Cost efficiency rescued muted Q1 sales, said Nuvama Institutional Equities. It said the Trent management did indicate rising input costs that they are actively mitigating through value-chain interventions and calibrated price adjustments. The consistent margin surprise has cushioned the business from operational deleverage, Nuvama said.

"We have tweaked our FY27 and FY28 revenue/Ebitda estimates by 0.2/8.6 per cent and 1.1 per cent/8.3 per cent respectively and arrive at a target of Rs 3,591 (Rs 3,219 earlier); maintain ‘BUY’. At CMP, the stock trades at 72 times/58 times FY27E/28E EPS," Nuvama said.

Among other brokerages, Goldman Sachs is 'Neutral' with a target of Rs 3,000. IIFL has 'Add' and a target of Rs 3,140. Ambit Capital has a target of Rs 3,536 on the stock.