Buy This Tata Group Stock For A Soaring 34% Return, Fastest Growing Value Fashion Brand

Reputed brokerage firm ICICI Securities has recommended investors to buy the stocks of Trent. The company is a Tata group stock and one of the leading players in the branded retail industry in India.

Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of Trent is Rs. 1100. ICICI Securities has estimated a Target Price for the stock at Rs. 1470. The stock has the potential to give a 34% return, in the upcoming 1 year. This is a large-cap company with a market capitalization of around Rs. 38,629 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1100
Target Price	Rs. 1470
Potential 1 year return	34.00%
52 week high share price	Rs. 1,346.85
52 week low share price	Rs. 828.95

According to the recently available report, Zudio remains the fastest growing value fashion brand in India with revenues surpassing Rs. 1000 crore in FY22, from Rs. 204 crore in FY19, translating into a robust CAGR of 72%. With achieving scale, the brand has clocked its highest EBIT margin of 6% in FY22. Westside format surpassed pre-Covid levels from H2FY22 onwards with positive SSSG, marking gross revenue at Rs. 2900 crore FY22. Westside has demonstrated a strong recovery with like-for-like sales surpassing the pre-Covid levels in Q3FY22 (109%), which was further accentuated in Q4FY22 (despite omicron challenges) with robust LFL sales growth of 16%.

On the other hand, Zara India has reported a strong topline growth of 61% YoY o Rs. 1815 crore in FY22, despite muted store additions. However, the losses for Star Bazar have widened YoY, mainly owing to higher discounts and sharper pricing. On a standalone basis, the company has ticked 7.9% EBITDA margins in FY22. But, at a consolidated level, EBITDA margins were lower at 4.2%, mainly owing to its subsidiary, Booker India.

ICICI Securities on the stock advantages and risks

Westside, one of the biggest brands, during the year stepped up the pace with accelerated digital investments and the integration of online and offline channels. Its online sales have registered a 74% YoY revenue growth in FY22, contributing 7% of Westside revenues. The Zudio stores have multiplied around 5.8x from FY19-22. Despite the second and third wave challenges, Zara's performance was ahead of other departmental stores, which exited FY22 with a revenue recovery rate of 80-85%. Its gross margins have improved significantly by 740 bps YoY to 37.5%.

According to ICICI Securities, "Trent has been an exceptional performer with the stock price appreciating at ~35% CAGR in the last five years. Robust performance during challenging times and industry-leading performance will continue to warrant premium valuations for Trent. We pencil in 215 store additions between Westside and Zudio for FY23-24E. The liquidity position remains robust with cash & investments worth above Rs. 600 crore that will enable it to tide over the current situation better than peers. Zudio continues to be the growth engine for Trent. We expect its revenues to grow at a CAGR of 48% in FY22-24E. In the long run, the company aims to grow its revenue at a CAGR of 25%."

Company profile: Trent

Trent is a Tata group brand, a leading retailer with a presence across various consumer categories with more than 550 stores. The company has the inherent strength of brands like Westside, Zudio, Star, and Zara, and accelerated store additions have led Trent to be among the fastest-growing.

Westside offers a range of its own branded fashion apparel and is the mainstay of the retailing business of the company, with 174 Westside stores across 90 cities. Zudio has 133 stores across 57 cities. Star, is fresh food and grocery retail chain, operating 60 stores across 7 cities. Landmark, a family entertainment concept, operates through 6 independent stores and is retailed through select Westside locations. Westside, having the brand's 72% of revenues, has proven to be one of the most profitable business models as it primarily focuses on selling private label brands. It has marked an EBITDA margin of 11%. Zudio, which has a 28% of sales, is the next leg of growth for Trent with a revenue CAGR of 72% in FY19-22.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.