Leading brokerage firm Sharekhan in his latest report has recommended to buy Tata Group Stock Trent Ltd for a potential gain of 37% if you buy it today at its current price of Rs 1029 apiece. Amongst the retail universe, Trent registered strong performance in the current fiscal with revenues and PAT clocking a CAGR of 11%/30% over FY2020-22 backed by strong store expansion plan.
Trent Stock Outlook
The current market price of Trent is Rs 1029. Its 52-week high was Rs 1346 apiece and 52-week low was Rs 838 apiece. The stock has given a return of 20% in one year and a massive return of 336% in 5 years. If you buy the stock today at its current price, it has the potential to surge to Rs 1415 apiece with a potential gain of 37%.
|Current Market Price||Rs 1029|
|Target Price||Rs 1415|
|52-Week High||Rs 1346|
|52-Week Low||Rs 838|
Balance sheet lean despite higher capex
In FY2022, Trent opened 126 stores (at standalone level) and did a capital expenditure of Rs. 255 crore. The company utilised its free cash on books and funds raised through promoter funding (raised Rs. ~900 crore in FY2020) for its strong capex programme. Further the inventory on books increased by 2x to Rs. 823 crore due to significant increase in store addition resulting in the Rs. 98 crore reduction in standalone operating cash flows in FY2022.
Despite strong capex programme and higher inventories on books, the cash at end of March 2022 stood at Rs. 520 crore (net cash stood at approximately Rs 20 crore).
Westside Robust Recovery
Westside registered strong recovery in FY2022 with revenues growing 93% on y-o-y basis to Rs. 2,725 crore (97% of pre-COVID levels). The company added 26 Westside stores in FY2022 (cumulative stores 200). Westside revenue per square feet stood at Rs. 9,950 (recovered to 93% of FY2020 levels). The brands overall bill size clocked a CAGR of 6% over FY2018-22 to Rs. 2,796 (with member's bill size increased by 7% to Rs. 3,283; members grew at CAGR of 14% to 77 lakhs).
On the other hand, Zudio revenues grew by 2.3x over FY2020 to Rs. 1,100 crore driven by 2.9x strong store addition over FY2020-22 (233 stores at FY2022-end).
Retail industry registered strong growth in April-May,2022
After short blip in the month of January 2022 affected by the COVID third wave, the retail industry saw strong month on month recovery from the month of Feb,22 on back recovery in the footfalls and strong pent-up demand. According to Industry reports, retail sales growth stood at 24% vs. pre-COVID level in the month of May 2022.
According to Sharekhan, "Trent's growth prospects remain robust owing to an accelerating shift to branded products and growing appetite for aspirational yet strong value propositions. Innovation in the product portfolio, scaling up of supply chain, 100% contribution from own brands, aggressive store expansions and leveraging on digital presence will be key growth drivers in the medium term. We expect its revenues and PAT to grow at CAGR of 33% and 57% over FY2022-24E, which will one of the strongest amongst the peers. The stock has corrected by 21% from its recent high.
About Trent Ltd
Established in 1998 and part of the Tata group, Trent is headquartered in Mumbai but has pan-India operations. Trent is one of the leading players in the branded retail industry in India. The current market capitalization of Trent is Rs 36,606 crore.
The stock has been picked from the brokerage report of Sharekhan. 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.