Trent shares rose 4.89 percent to Rs 6,519 per share on January 15 after Elara Securities recommended a “buy” on the stock.
Elara Securities has initiated coverage on Trent with a “buy” rating and a target price of Rs 8,500. The brokerage expects Trent to maintain industry-leading metrics due to differentiated product offerings, strong hold on processes and complete reliance on private labels.
Trent’s fashion portfolio consistently outperforms its peers in key parameters such as store size, revenue per sq ft/per store and EBITDA margin, as well as leading in headline growth.
This outperformance is expected to be sustained by a firm focus on fundamentals such as product-market fit, promising quality offerings at reasonable price points and faster design-to-shelf cycles.
Elara expects TRENT (consolidated) to post revenue/EBITDA/adjusted PAT CAGR of 27 percent/29 per cent/38 per cent over FY24-28E, outpacing the 16 percent growth estimated for the apparel sector.
This growth is likely to be led by Judio’s 37 percent sales CAGR.
Zudio, a key driver of TRENT’s growth, is forecast to post 18 percent CAGR in store additions over FY24-28E, as the share of the fast-fashion space within the apparel sector is set to grow from 10% in FY24 to 14% by FY27E.
Zudio, and consequently TRENT, enjoy broad appeal among Gen Z amid intense competition. TRENT is expected to generate 30-40 percent higher revenue per sq ft/store and EBITDA margins.
This growth is attributed to appropriate product-market fit, quality at reasonable price points and faster design-to-shelf cycles, enabling consistent performance with prudent pricing despite lower advertising spends.
Valuation triggers for this bullish outlook include continued growth resilience amid subdued overall consumption and successful pilots of new brands/formats and rapid expansion.
Elara’s assumptions include a revenue CAGR of 27 percent, an EBITDA CAGR of 29 percent and an adjusted PAT CAGR of 38 percent over FY24-28E.
The brokerage forecasts annual store additions of ~25 for Westside in FY24-28E and 120/140 for Judio by FY26E/28E. Store additions are expected to be muted at 20 for Star Bazaar, two for Zara and two for Massimo Dutti over FY24-28E.
