1:10 Split, 320% Dividend; Buy Tata's Retail Stock; Rs 4,870/TP By Motilal, Rs 4,720/TP By IIFL

Tata Group-backed specialty retail company, Trent is an attractive bet after its Q4 results. Trent witnessed robust customer reception and healthy SSSG despite challenging environment. Accordingly, brokerages have recommended to buy the stock.

The company has recommended a Dividend of 320% i.e., Rs. 3.20/- per Equity Share of Re. 1/- each, subject to the approval of shareholders. The Dividend, if approved, shall be paid on or after the second day from the conclusion of the 72nd Annual General Meeting.

Centrum On Trent:

We note in a challenging environment across categories and aggressive store expansion Trent witness robust customer reception and healthy SSSG indicating, (1) successful marketing strategy driving value-for-money customers, (2) sharp price points leading to customer traffic, (3) right store matrix.

Further continued store expansion and earning beat we have increased FY25E/FY26E earnings by 8.1%/8.3%. Though we are optimistic on Trent's growth story, given stretched valuation we retain ADD rating with a revised SOTP based TP of Rs4,564 (implying PE of 80.8x FY26 earnings). Risk Increase in competitive intensity, weakening of demand environment.

Motilal Oswal On Trent:

TRENT's strong performance with 10% LFL growth and robust footprint additions is an outlier in our retail coverage universe, which is facing a challenging demand environment. Unlike peers that passed on the sharp RM price increases last fiscal, TRENT absorbed the impact, seeing strong customer reception and is now reaping the benefits as RM prices turn benign.

We have broadly kept revenue and EBITDA estimates unchanged; however, owing to the reassessment of lease liability, we have raised our standalone PAT estimates by 9%/7% for FY25/FY26. Over FY24-26, we factor in a CAGR of 32%/30%/38% in standalone revenue/EBITDA/PAT, led by a strong 20% YoY footprint addition and healthy SSSG.

We assign 50x EV/EBITDA to the standalone business (Westside and Zudio; premium over our retail coverage universe, given its superior growth), 2x EV/sales to Star Bazaar, and 15x EV/EBITDA to Zara on FY26E, and arrive at our TP of INR4,870. Adjusting Star and Zara value, the stock is trading at 75x FY26E EPS of the standalone business. We reiterate our BUY rating on the stock.

IIFL Securities On Trent:

Trent continued its stellar run, delivering 53% top-line growth and 125% Ebitda growth in 4QFY24. Gross margin expanded by 449bps YoY, driving a 27% beat vs. our estimates at Ebitda level. With accelerated store additions in Zudio, significant outperformance vs. peers, sharp margin expansion and improvement in ROIC, Trent continues to deliver on all fronts. We upgrade our adj Ebitda estimate by 15-16% and forecast 31% Ebitda Cagr over FY24-27ii. Maintain BUY rating with a TP of Rs4,720.