Trent shares surge 5% to hit 52-week high on aggressive expansion push

The share price of Trent surged 5 percent in the early trade on June 13 to hit a 52-week high of Rs 1,675, a day after the Tata group company came out with an aggressive expansion plan at its annual general meeting, which was cheered by brokerages.

The highlight of its meeting was the branded retail player’s robust guidance for an addition of 200 stores for Zudio in FY24, a number higher than anticipated by most brokerages. Other highlights from the AGM included a guidance of 30 store additions for Westside, 10 Samoh stores in FY24, and a gross capital expenditure plan of Rs 800 crore for the current fiscal. The company is also eyeing an expansion in the international market.

At 11.48 am, shares of Trent were trading at Rs 1,672, up 4.8 percent on the National Stock Exchange.

Brokerages also cheered for the company’s growth plans, with Nuvama Institutional Equities and Motilal Oswal Financial Services assigning a “buy” call to the stock.

Nuvama also raised its FY24/25E EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates for Trent by
10 percent/14 percent to bake in higher store additions.

While the firm is yet to adjust for Zudio’s franchise model, its increasing share is positively altering the returns profile, making the stock a top pick for Nuvama.

The broking firm is also bullish on the company’s Zudio brand, which offers affordable fashion, as it sees a potential in it to even outpace Westside over the next decade.

Even while being on an aggressive expansion spree from FY23, the company managed to sustain its financials aided by Zudio’s improving margins. Motilal MOFSL expects Trent to continue the historically robust footprint growth through its expansion plans.

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Even though Motilal Oswal took note of Trent’s rich valuations — it trades at a P/E of 54.8x on FY25E basis —  it believes the company has a strong growth potential and historically robust performance justify its higher multiples.

ICICI Securities also backed the view, saying the company’s industry- leading performance and consistent revenue growth will support its premium valuations.

“Trent has, over the years, consistently outperformed peers given the strong brand patronage (Westside, Zudio, Star, Zara) and proven business model (Westside: 100 percent private label),” the brokerage said in a note.

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