220% Dividend: Multibagger Tata Stock Recommended As Buy For TP Of Rs 3,140; Gains By 150% From 1-Year Lows

Specialty retail company, Trent who earlier this month became the fifth company under Tata Group to cross Rs 1 lakh crore, is nearing its 52-week high levels. Brokerage Motilal Oswal after an interaction with Trent's Executive Director and CEO, P. Venkatesalu, concluded that the company is creating new growth and expanding its offerings. Due to this, Motilal has recommended buying this Tata stock. A potential of nearly 10% upside is seen ahead.

Motilal highlighted the following pointers from the discussion with Venkatesalu:

Building a platform:

Trent is building a platform to scale up 4-5 large formats. Each format has to pass the test of a) customer relevance, b) potential to achieve critical mass, and c) bringing resilience to wither the competition. However, it is cognizant of capital efficiency, and therefore it focuses on a) building in-house instead of growing through acquisitions and b) does not ramp up all formats aggressively at the same time. However, it is evaluating formats that can operate at scale. Star, Samoh and Utsa could be the next levers of growth.

Own brand, own label:

The company always focuses on bringing exclusivity to its offerings; therefore, it will continue to own the complete retail network and sell only own brands. New platforms will work on two guiding principles: 1) value category will be a key play in any new offering; 2) it will try to keep women as the center point of the product proposition.

Star, solved a lot of puzzles:

Star has solved three key factors that a brand needs to offer exclusivity: 1) fresh category, 2) private labels, and c) value offerings. Star has driven healthy improvements in footfalls recently. This provides the potential to scale up the brand's footprint in the format aggressively.

Expand the offering:

Trent is continuously working on new categories in each format to increase customer wallet share and improve store productivity. For instance, beauty, lingerie innerwear, and footwear have become sizeable contributors to store revenues.

Following this, Motilal's note said, "We factor in standalone revenue/EBITDA CAGRs of 46%/51% over FY23-25, led by a strong 25% footprint addition and healthy SSSG."

It added, "We assign 37x EV/EBITDA to the standalone business (Westside and Zudio; premium over our Retail Universe, given its superlative growth), 2x EV/sales to Star Bazaar, and 15x EV/EBITDA to Zara on Sep'25E, and arrive at a TP of Rs 3,140. We reiterate our BUY rating on the stock."

On BSE, Trent's share price closed marginally up on December 12th to end at Rs 2,885.70 apiece. During this day, the stock had reached as high as Rs 2,909.95 apiece -- which was just a couple of rupees away from its 52-week high of Rs 2,916.20 apiece.

From its 52-week low of Rs 1,155.10, currently, Trent shares are up by 150%. YTD, the stock has zoomed by at least 115% on BSE.

Also, Trent is among dividend-paying stocks and has held a consistent track record of rewarding investors with this benefit for the past five years. In 2023, the company paid a dividend of 220% amounting to Rs 2.2 per share.

At present, Trent has a dividend yield of 0.08%.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.