Buy This Multibagger Tata Group Retail Stock For Rs. 1430 Target Price: Motilal Oswal

Motilal Oswal in its report dated April 19, 2022 has upgraded the multibagger Tata group retail stock Trent to a 'Buy' for a target price of Rs. 1430 i.e. an upside of over 12% from the current price of Rs. 1273 per share. Trent launched in 1998 is headquartered in Mumbai and has PAN India operations. The brands running under the company include Westside, Zudio, Star- a fresh food and grocery retail chain and Landmark. The company's stock over the 3-year period has yielded returns to the tune of 253% and last at 10:20 am is priced at Rs. 1271.35 per share.

Company's growth has been at an accelerated pace as viewed by the brokerage:

The growth of 15% over Fy20-22E is outstanding and given the pace at which footprint is expanding has been remarkable, infact much ahead in the industry. The brokerage based on the company's channel checks as well as performance of the current stores "has revised FY24E revenue/EBITDA up by 5.8%/6.5%and are now building in 37%/57% revenue/EBITDA CAGR on the back of a recovery
from the COVID-19 pandemic, 33.5% footprint growth, and 9% SSSG on a stable state basis. Interestingly, all this growth has been largely funded internally".

Channel or brand check instills confidence

There has been offeered a good feedback on the company's retail outlets and there is seen a better recovery as well as budgeted sales. The reason being sticky customer base, a higher fashion quotient which offsets any price hike situation and also a lesser impact on the affluent customer base of the company due to Covid and inflationary pressure.There has been offeered a good feedback on the company's retail outlets and there is seen a better recovery as well as budgeted sales. The reason being sticky customer base, a higher fashion quotient which offsets any price hike situation and also a lesser impact on the affluent customer base of the company due to Covid and inflationary pressure.

Valuation and view:

The company's stand has been very well when it comes to store perfomance, store economics and aggressive growth plans. "We expect 37% revenue growth over FY22-25, 4% above our Retail coverage universe, which warrants a premium valuation. We have ascribed a 31x FY24 EV/EBITDA to the standalone business (Westside and Zudio, 15% premium for the last five years until the COVID-19 outbreak and 10% premium to our Retail coverage universe), 1x EV/sales to Star Bazaar, and 15x EV/EBITDA to Zara to arrive at our TP of INR1,430/share (from INR1,180/share earlier). We have upgraded the stock to Buy.The key downside risk to our thesis is a potential GST rate hike on apparels to 12% from 5%, which can adversely impact demand, especially in the price sensitive Value Retail segment. Increasing raw material prices can compel apparel retailers to undertake another round of price hikes, which can adversely impact sales volumes", claims the brokerage firm.

 

Disclaimer:

The stock is taken from the report of Motilal Oswal which has upgraded the stock as a 'Buy'. Nevertheless, you should construe the report as an investment advice and engage in your due diligence before making any market linked bets.

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