Trent: Worst-performing Nifty stock since last Muhurat trading is down 33%; what's next? 

Trent Ltd has emerged as the worst-performing Nifty stock since last Muhurat trading, losing one-third of its market value. Analysts said while Trent continued to outperform its peers fundamentally, its growth trend appears to be moderating due to the elevated base. 

For the September quarter, Trent’s reported standalone revenue (including GST) grew 17 per cent YoY. MOFSL said Trent’s revenue growth continued to decelerate against 57 per cent, 40 per cent, 37 per cent, 29 per cent and 20 per cent in the last five quarters, likely due to slowing same store sale growth (SSSG) on self-cannibalisation and a high base effect. 

MOFSL said after a subdued store expansion activity in the June quarter, store expansion picked up pace in the September quarter, with the total store count rising 33 per cent YoY to 1,101.

"We note that store additions typically pick up pace in 2H, and all eyes would be on a further scale-up of Trent’s fashion footprint as store expansion remains its biggest growth driver amid weakening SSSG," it said while suggesting a 'Buy' and a target price of Rs 6,315 on the stock. 

Nuvama is expecting Trent to report Q2 profit of Rs 451.60 crore, up 7 per cent YoY. Ebitda margin is seen coming in at 16.5 per cent. Trent's top-line growth of 17 per cent, a slowdown was due to weakening demand, cannibalisation from new stores in same micro-markets and base effects. The brokerage expects gross margin for Trent to reduce to 43.4 per cent in Q2 from 44.2 per cent in Q2FY25, owing to a change in mix in favour of Zudio.

Going ahead, said Axis Securities, all eyes would be on demand outlook in metros, tier 2 and tier 3 towns amid the festive season. Investors would also track store expansion guidance, the brokerage said in its Q2 preview note. 

Antique Broking in a recent note highlighted that while Trent continued to outperform its peers, the growth trend appears to be moderating due to the elevated base. 

The domestic brokerage feels Trent is well-positioned to navigate the competitive business environment in the medium to long term and that its foray into the Gen-Z demand through its brand Burnt Toast (BT) is a positive development, indicating to management’s focus on tapping into evolving fashion trends. 

"We maintain our positive stance on Trent with a Buy recommendation at a target of Rs 7,031 based on SoTP valuation on 1HFY28 estimates," Antique said. On Tuesday, the scrip was trading 3.41 per cent lower at Rs 4,608.05.