Leading brokerage ICICI Direct has been optimistic about the stock of Trent Ltd and suggested investors to buy for a target price of Rs 1620 apiece with a potential gain of 21%. The market capitalization of Trent Ltd is 49,066.16 crore. The stock has registered strong annual EPS growth and has a dividend yield of 0.12%.
1. Trent Ltd Stock Outlook
The current market price of the stock is Rs 1384 apiece with a 52-week high at Rs 1390.60 apiece and 52-week low at Rs 866 apiece. The stock has gained 3.27% in trading today till afternoon. According to ICICI Direct, if you buy the stock at the current market price, it can achieve the specified target of Rs 1620 in 12 months with a potential gain of 21%.
Multibagger return: The stock has given 54% return in 1 year, 210% in 3 years, and 420% return in 5 years.
Scaled new 52-week high today: The stock has touched a new 52-week high today. When it comes to the days range of the stock, it opened at Rs 1332 apiece and climbed the day's high of 1390.60 apiece.
|Current market price||Rs 1380|
|Target Price||Rs 1620|
|1 Year Return||54%|
|3 Years Return||210%|
|5 Years Return||420%|
2. Trent Ltd Q1FY23 Results
Trent reported a superlative performance with industry best revenue growth and strong beat on almost all parameters (change in useful life of certain stores impacted PAT). On a favourable base, sales grew 405% YoY to Rs 1653 crore (I-direct estimate: Rs 1302 crore). On a three-year CAGR basis, revenue growth was at 29%, which is the highest among other lifestyle retailers. Gross margin contraction was higher than anticipated (down 430 bps QoQ to 49.3% vs. I-direct estimate 52.3%). Lower gross margins could be possibly owing to limited price hike in Zudio format as it continues to price products at sharper price points (< | 500) despite significant increase in cotton prices. EBITDA, in absolute terms, came in much higher than our estimate at Rs 304.1 crore (I-direct estimate: Rs 256 crore, three-year CAGR: 23%).
3. Key triggers for future price performance
We pencil in 227 store additions between Westside and Zudio for FY23-24E. Liquidity position remains robust with cash & investments worth 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 revenues to grow at a CAGR of 50% in FY22-24E. In the long run, the company aims to grow its revenue at CAGR of 25%+.
4. Trent Ltd Valuation
According to ICICI Direct, "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. Hence, we maintain our BUY rating on the stock. We value Trent at | 1620 based on SOTP (Sum-Of-The-Parts) valuation.
5. About Trent Ltd
Trent is India's leading retailer with a presence across various consumer categories (550+ stores). Inherent strength of brands (Westside, Zudio, Star, Zara) and accelerated store additions have led Trent to be among the fastest growing companies in our retail coverage universe.
'Westside' (72% of revenues) has proven to be one of the most profitable business models as it primarily focuses on selling private label brands (EBITDA margin: 11%, consistent SSSG: 10%+). 'Zudio' (28% of sales), the value fashion brand, continues to be the next leg of growth for Trent (revenue CAGR: 72% FY19-22)
The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.