Trent enters top-100 most-valued firms' club; m-cap crosses Rs 50,000 crore

In the past one week, the stock has rallied 11 per cent after the company reported strong earnings for Q1FY23 with industry best revenue growth and strong beat on almost all parameters

Trent, on Wednesday, entered the elite club of top-100 most valued companies in terms of market captialisation as the share price hit a new high of Rs 1,477.45, up 4.7 per cent on the BSE in intra-day trades. The market capitalisation (m-cap) of the Tata Group Company engaged in retail business crossed the Rs 50,000 crore-mark today.

With an m-cap of Rs 51,912 crore, Trent stood at 100th position in overall m-cap ranking at 11:17 AM. The company surpassed online food delivery platform company Zomato, whose m-cap stood at Rs 49,184 crore, the BSE data shows.

As part of the Tata Group, Trent operates Westside, one of India's leading chains of fashion retail stores, Zudio, which is a one-shop destination to get fashion at great value, Trent Hypermarket, which operates in the competitive food, grocery and daily needs segment under the Star banner, and Landmark Stores, a family entertainment format store.

In the past one week, the stock price of Trent has appreciated by 11 per cent after the company reported strong earnings for the quarter ended June 2022 (Q1FY23) with industry best revenue growth and strong beat on almost all parameters. In comparison, the S&P BSE Sensex was up 2 per cent during the same period. In the past one year, the stock has zoomed 65 per cent, as against a 7.6 per cent gain in the benchmark index.

On a favourable base, standalone sales grew 405 per cent year-on-year to Rs 1,653 crore. The growth was driven by robust store addition trajectory over the last two years. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA), in absolute terms, came in much higher than analysts estimate at Rs 304.1 crore.

Robust performance during challenging times and industry leading performance will continue to warrant premium valuations for Trent. Hence, we maintain our BUY rating on the stock with a target price of Rs 1,620 per share, analysts at ICICI Securities said in its result update.

“We pencil in 227 store additions between Westside and Zudio for FY23-24E. Liquidity position remains robust with cash & investments worth Rs 600+ crore that will enable it to tide over the current situation better than peers. Zudio continues to be the growth engine for Trent. We expect revenues to grow at a CAGR of 50 per cent in FY22-24E,” the brokerage firm said on key triggers for future price performance.

Over the past four years, Trent opened 301 stores of Westside and Zudio. Over the past 10 years, management has patiently tried and tested sustainability of the business model before replicating it on a pan-India basis. We believe this expansion spree will continue over the next two years and increase store counts from 433 in FY22 to 578 by FY24E, analysts at Centrum Broking had said in initiate coverage report dated July 19, 2022.

With improved scale, the brokerage firm expects Trent to post sales CAGR of 25 per cent over FY20-24E, achieve economies of scale & improve pricing power with vendors in the long term, and improve synergy, leading to cost savings.

Tech Outlook

Target: Rs 1,539

Support: Rs 1,307

Shares of Trent Ltd hit a fresh record high of Rs 1,477 apiece on the BSE today, rising over 4 per cent. With this, the stock is seen sustaining above the higher end of the daily Bollinger Band for the third straight trading seen, now placed at Rs 1,430. The stock is also holding above the Bollinger Bands on the weekly, and monthly charts.

Going ahead, if the stock is able to hold on to these levels, it may hit Rs 1,539 levels, yearly Fibonnaci Chart suggests. Beyond this, the stock may see levels of Rs 1,553, and Rs 1,615. On the downside, the immediate support for the stock stays at Rs 1,430, followed by the trendline support of Rs 1,307.

The price-to-moving averages' action, along with momentum indicators, suggest bulls in control of the momentum.

(With inputs from Nikita Vashisht)