Trent Ltd, the retail arm of the Tata Group, witnessed a 2 percent increase in its shares for the second consecutive day, reaching Rs 2,485.95, following its impressive Q2 FY24 earnings report. The company reported a remarkable 189 percent year-on-year surge in consolidated net profit, reaching Rs 228 crore in the second quarter.
This remarkable performance was driven by robust revenue, significantly higher than the previous year’s Rs 78.94 crore.
At 10:15 am, Trent shares were trading at Rs 2485.95, up by approximately 2.56 percent from the closing price on November 7.
On a consolidated basis, revenues soared by 52.7 percent year-on-year to reach Rs 2,982 crore, compared to Rs 1,953 crore in the same quarter the previous year. The company achieved a net income of Rs 3,062 crore in the second quarter.
Analysts at Jefferies noted, “Consolidated revenue surpassed estimates as Zudio revenues more than doubled, driven by a 50 percent increase in store base, while Westside revenues grew by over 20 percent.”
Nuvama Institutional Equities highlighted that the increase in profit growth was partly due to franchise-driven expansion in Zudio.
Trent’s EBITDA (earnings before interest, taxes, depreciation, and amortization) witnessed a significant 78.5 percent year-on-year increase to Rs 456.57 crore, compared to Rs 255.81 crore in the same period a year ago. The EBITDA margin also expanded from 13. percent to 15.3 percent year-on-year.
The company’s EBITDA and profit were boosted by revenue growth, with a higher mix of Zudio revenues and sharper in-store pricing contributing to this growth.
Trent operates 223 Westside, 411 Zudio, and 27 stores across other lifestyle concepts as of September 30. In Q2FY24, the company added six Westside and 27 Zudio stores while closing four outlets in each format.
Emerging categories such as beauty and personal care, innerwear, and footwear accounted for over 19 percent of standalone revenue, similar to Q1FY24. These categories continued to gain traction with customers.
The Star business, consisting of 65 stores, saw increased customer traction with growing sales densities, resulting in a 30 percent operating revenue growth in Q2FY24 compared to the corresponding previous period.
Brokerage Views:
- Jefferies: Hold – Jefferies maintains a ‘Hold’ rating, citing Trent as a structural story in the growing organized apparel market in India. However, they remain cautious due to expensive valuations.
- Nuvama Institutional Equities: Buy – Nuvama retains a ‘Buy’ rating, justifying Trent’s premium valuation, and revises the target price to Rs 2,855.
- Kotak Institutional Equities: Add – Kotak Institutional Equities raises its estimates and maintains an ‘Add’ rating with a revised target price of Rs 2,700.
In summary, Trent’s strong performance and expansion strategies have drawn positive reviews from analysts, despite varying outlooks on its valuation.
