Trent on Wednesday entered the elite club of the 100 most valuable companies by market capitalization as the share price hit a new high of Rs 1,477.45, up 4.7% on BSE in intraday trading. The market capitalization (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 the 100th position in the overall m-cap standings at 11:17 am. The company overtook online food delivery platform company Zomato, whose m-cap stood at Rs 49,184 crore, according to BSE data.
As part of the Tata Group, Trent operates Westside, one of India’s leading fashion retail chains, Zudio, which is a one-stop destination to get fashion at a great price, Trent Hypermarket, which operates in the competitive sectors food, groceries and daily life. needs under the Star banner, and Landmark Stores, a family entertainment store.
Over the past week, Trent’s share price has appreciated 11% after the company reported strong earnings for the quarter ended June 2022 (Q1FY23) with the best revenue growth in the industry and a strong progression on almost all the parameters. By comparison, the S&P BSE Sensex rose 2% over the same period. Over the past year, the stock has climbed 65%, versus a 7.6% gain in the benchmark.
On a favorable basis, standalone sales increased by 405% year-on-year to Rs 1,653 crore. Growth was driven by a strong trajectory of store additions over the past two years. Earnings before interest, tax, depreciation and amortization (EBITDA) of the company, in absolute terms, is well above analysts’ estimate at Rs 304.1 crore.
Robust performance in difficult times and industry leading performance will continue to justify higher valuations for Trent. Therefore, we are maintaining our BUY rating on the stock with a target price of Rs 1,620 per share, analysts at ICICI Securities said in its earnings update.
“We are adding 227 stores between Westside and Zudio for FY23-24E. The liquidity position remains strong with cash and investments worth Rs 600+ crore which will enable it to weather the current situation better than its peers. Zudio continues to be Trent’s growth engine. We expect revenue to grow at a CAGR of 50% in fiscal year 22-24E,” the brokerage said on key drivers for future price performance.
Over the past four years, Trent has opened 301 Westside and Zudio stores. Over the past 10 years, management has patiently tried and tested the sustainability of the business model before replicating it pan-India. We expect this expansion spree to continue over the next two years and grow store counts from 433 in FY22 to 578 by FY24E, Centrum Broking analysts said in an initial coverage report dated July 19, 2022.
With improved scale, the brokerage firm expects Trent to post a 25% sales CAGR in FY 20-24E, achieve economies of scale and improve pricing power with vendors at term, and improves synergy, which will lead to cost savings.
Target: Rs 1,539
Support: 1,307 rupees
Going forward, if the stock is able to maintain these levels, it could rise to the levels of Rs 1,539, the annual Fibonacci chart suggests. Beyond that, the stock may see levels of Rs 1,553 and Rs 1,615. On the downside, the stock’s immediate support remains at Rs 1,430, followed by trendline support of Rs 1,307.
(With contributions by Nikita Vashisht)