Trent stock hits 52-week high; analysts forecast 30-31% CAGR growth

Trent in focus: The retail company Trent, has defied market odds by reporting strong performance amid a challenging retail landscape, analysts said. The stock has soared as much as 5.97 per cent  to hit a fresh 52-week high of Rs 3,763.55 in early trade on Thursday.

Notably, the shares climbed over 15 per cent on Wednesday after the result announcement. 

In the December quarter (Q3FY24), the Mumbai-based company displayed a robust standalone revenue growth of 53 per cent, slightly missing expectations by 5 per cent, brokerage firm Motilal Oswal said in a note. 

Image Credits: Ttrent

The growth trajectory was primarily fuelled by a 10 per cent like-for-like (LFL) growth and strategic store expansions. 

Meanwhile, the company's strong financials were further bolstered by favourable raw material (RM) costs, leading to an improvement in gross margins, analysts said. 

Earnings before interest, tax, depreciation, and amortisation (EBITDA) and profit after tax (PAT) soared by 86 per cent and 2.1 times year-on-year respectively, surpassing estimates by 6 per cent and 8 per cent.

Motilal Oswal analysts project a promising outlook for Trent, forecasting a 30 per cent and 31 per cent Compound Annual Growth Rate (CAGR) in revenue and EBITDA respectively over the period spanning FY24 to FY26. 

The optimistic forecast is underpinned by the company's robust revenue productivity, aggressive store expansion strategies, margin enhancement from moderating RM costs, and operational leverage, the brokerage highlighted.

The company’s revenue drivers encompass its flagship Star segment and improving store metrics, which present major upside potential. Trent’s resilience stands out in the retail sector, particularly against the backdrop of a subdued market environment.

In terms of revenue breakdown, Westside and Zudio witnessed strong growth, with revenue surging by 24 per cent and 93 per cent respectively year-on-year.  

Star, the grocery segment, also posted a 26 per cent revenue increase, driven by a strong LFL jump of 24 per cent year-on-year.

Trent's prudent approach during the RM upcycle in financial year 2022-2023 (FY 22-23), where it refrained from passing on price increases to customers, is now paying dividends as RM prices moderate. This strategic decision has enabled the company to maintain strong customer loyalty and profitability.

Management commentary highlighted a notable improvement in standalone Pre-Ind AS EBIT margin, to 13 per cent, compared to 8.5 per cent in Q3FY23. 

Additionally, the fashion concept formats recorded a robust LFL growth of over 10 per cent year-on-year, showcasing Trent's ability to resonate with evolving consumer preferences.

Looking forward, Trent's aggressive store expansion coupled with a diverse product portfolio, including emerging categories like beauty, personal care, innerwear, and footwear, positions the company for sustained growth in the coming years, the brokerage added.

Analysts maintain a bullish stance on Trent, reiterating a ‘buy’ rating with a revised target price of Rs 4,200.

As of 9:25 am, shares of Trent were trading 5.39 per cent higher at Rs 3,803.95 per share