This Multibagger Tata Group Stock Is Among Top Picks For 2023, Axis Securities Suggests Buy For 23% Gains

Leading brokerage firm Axis Securities has assigned "buy" on Trent Limited, a midcap Retail Sector Tata Group stock. The stock is among the Top picks for 2023 by the brokerage. It has estimated a target price of Rs 1650/share to the stock for a potential gain up to 23% if it is purchased at the current market price. It has a market capitalisation of Rs 47,941.04 crore.

Stock Outlook & Returns

The Current Market Price (CMP) of the stock is Rs 1,348.60 apiece on NSE. It recorded its  52-week high at Rs 1,566/share on 01 November 2022, and its 52 week low at Rs 980/share recorded on 24 February 2022, respectively.
It surged 1.21% in the past 1 week and fell 7.44% in the past 1 month. It gave 29.87% positive return in the past 1 year. In the past 3 years, it gave 147.25% multibagger returns and in the past 5 years, it gave 300% multibagger returns. 

 

Investment Rationale

Retail back to pre-pandemic levels: Consumer sentiments have improved post-pandemic with reopening including offices, colleges, holidays, and marriages, among others. This is manifested in Trent's operating performance in Q2FY23. The company reported 30% revenue growth on a 3-year CAGR, the highest among peer retail players led by newly added stores in the last 12 months. Furthermore, the management aims to double down on the growth agenda over the medium term.

On an expansion spree: Trent continues to remain focused and committed to its accelerated store expansion agenda. The management is prioritizing refreshing stores and simultaneously consolidating/exiting stores that have been reporting suboptimal performance from a brand perspective. The company's balance sheet remains strong, aided by healthy CFO generation. Trent now has a portfolio of over 500 stores across Westside and Zudio.

Zudio driving scale and profitability: Zudio sales grew ~70% on a 3-Year CAGR basis on account of rapid store expansion to 233 stores in FY22 from just 40 in FY19. Zudio is expected to drive operating leverage and profitability for Trent with its - 1) Focus on fast fashion driving higher footfalls, 2) Low Capex and operating cost requirement (being its presence in small towns), and 3) Faster break even.

Gunning on Omni-channel strategy: Online revenues through Westside.com, Tatacliq and Tata Neu contributed ~6% of Westside revenues, registering a 32% growth in Q2FY23 over the corresponding quarter. Trent has also launched exclusive styles on its online platform which is witnessing encouraging traction.

Improving return profile across segments: Reducing losses in Star Bazaar and improving traction in Inditex JV are also positive signs for the company. Over the last couple of years, Trent, with its Star food business has pursued the model of tight footprint stores, sharp pricing, and focus on fresh and own brand offerings. This model is resilient and exhibits strong economic viability.

Outlook & Valuation

Superior store metrics, supply chain optimization, diligent focus on cost rationalization, aggressive store expansion, higher contribution from private brands, and innovative offerings in the value space would be key growth drivers in the long run. "We recommend a BUY rating on the stock with a TP of Rs 1,650/share, implying an upside of 23% from the current levels," Axis Securities said.

About the Company

Trent - a Tata Group company is a leading branded retail company which operates stores across five concepts - Westside, Zudio, Star, Landmark, and Utsa. Trent's flagship concept - Westside offers branded fashion apparel, footwear, and accessories for women, men and children, along with a wide range of home furnishings and decor. Trent's value fashion concept - Zudio offers fashion at irresistible prices for men, women, and children. Other formats include Star Bazaar (Hypermarket and supermarket store chain), and Landmark (which offers a curated range of toys, frontlist books, stationery, and sports merchandise. The company also operates subsidiaries of Zara and Booker stores in India.

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. 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 consult with certified experts before making any investment decision.