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Buy This Large Cap Retail Stock With A Target Price of Rs. 1,180: Axis Securities

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Axis Securities in its pick of the week report has initiated a buy call on the shares of Trent Ltd. The brokerage has set a target price of Rs. 1,180 for the stock and expects the stock to hit its target price in 6 to 9 months from its current market price. On the NSE, the stock is now trading at a price of Rs. 1,054.15 per share. Trent Ltd. is a subsidiary of the Tata Group of Companies and is a major operator in the retail market of India.

 

The brokerage’s take on Trent Ltd.
 

The brokerage’s take on Trent Ltd.

On 25th December 2021, Axis Securities in its pick of the week report has said that "Trent's fashion business reported a remarkable recovery in H1FY22 and the momentum is expected to continue in H2FY22 as well aided by a strong festive and wedding season led buying. This will lead the company to come back to the profitability plane after having witnessed an adverse impact of the pandemic on its business. Management has indicated that it will continue to focus on store expansions at an accelerated pace of more than 100 stores per annum between Westside and Zudio over the next few years. Currently, Trent has ~195 Westside stores and ~160 Zudio stores that are operational with several additional stores being fitted out and ready to open once the necessary approvals are obtained. Given the focus on store expansion, we believe Westside could continue to report a sustained 7-8% SSSG while revenue contribution from Zudio could increase beyond 21% in FY21 which in FY20 was less than 15%."

According to the brokerage "Trent's management has indicated a significant scale-up in the Zudio format which is a value fashion play targeting youth between 15-25 years. Zudio offers trendy products with sharp price points across entire product offerings at less than Rs. 999 and 2/3 rd offered at less than Rs.499. This is a highly profitable format with high revenue per sq. ft of about Rs. 10,000 and ~40% gross margins. With backend processes and infrastructure aligned with Westside at store level, Zudio has already become profitable."

Buy Trent Ltd Suggests Axis Securities

Buy Trent Ltd Suggests Axis Securities

The brokerage has claimed in its research report that "Management continues to focus on reduction in rental and other related charges and expenses by engaging with property partners. Further, it is looking to variabalize certain expenditures with that to revenues including lease payments thus mitigating the downside pressure on margins. With cost-saving initiatives and increasing scale of operations, Trent could report significant improvement in margins in Q3FY22 and Q4FY22. We recommend BUY with a TP of Rs 1,180/share."

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Axis 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.

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