Trent Ltd. share price target

We maintain our SOTP based TP to Rs 990 (Rs 790, previously) and maintain our current rating to HOLD given the negative impact of the second COVID-19 wave leading to lockdowns across states.

Minimised discounting with lower EOSS days in FY21 (gross margin for Zudio, Westside improved 100 bps, 150 bps YoY to 40%, 58%, respectively What should investors do? Trent has been an exceptional performer with the...

Since the acquisition in FY18, revenues from value fashion brand Zudio, have grown from | 144 crore to | 507 crore as on FY20, translating into robust CAGR of 88%. Despite a washout in Q1FY21 (revenue decline by 80% YoY), Zudio displayed a resilient show from H2FY21 onwards. The like for like (LFL) recovery rate got enhanced sharply to 91% in Q3FY21 and 100% in Q4FY21. Revenue decline was restricted to 5% YoY at | 480 crore in FY21. The fact that Zudio is not promoted as Westside or a Tata brand signifies the inherent strength of the business model. Given the scalability of the brand...

We maintain our SOTP based TP to Rs 790 (Rs 780, previously) and change our current rating from BUY to HOLD given the negative impact of the second COVID wave leading to lockdowns across states.

TRENT posted a 7% YoY revenue increase (7% beat), supported by easing restrictions and improving customer traction over JanFeb'21. EBITDA grew 47% YoY on a lower base, aided by high gross margins. The gradual recovery seen after nine months of lockdown has once again been derailed due to the second COVID wave. Thus, we revise down our FY22E revenue/EBITDA estimate by 26%/44%, but largely maintain FY23 estimates factoring in recovery, coupled with the ongoing steady pace of...

We retain our SOTP based TP of Rs. 786. Maintain BUY.

While revenue fell 17% YoY (in line), EBITDA saw a massive 26% beat on gross margin (GM) improvement of 570bp, benefiting from a provision write back of INR140m (190bp gain) and potential reduction in discounted sales. Adjusting for write-backs, EBITDA fell 4% YoY (16% beat). Its historic, industry-leading growth should resume in FY22 as aggressive store additions have already resumed. We have raised our FY22E EBITDA...

We believe Trent is best placed to bounce back post COVID-19 pandemic, driven by its success in Westside' concept (exclusive brands at competitive prices), ramp up of value fashion format Zudio', sustainable margins (led by superior store metrics

With the current unprecedented scenario various retailers have significantly curtailed their store expansion guidance for FY21E. However, Trent is among the few retailers who has reiterated their stance of aggressively adding stores. In H1FY21, it added 11 additional stores (eight Zudio, two Westside, one Landmark). We expect store addition momentum to accelerate in H2FY21E. On b/s front, better inventory management has led to working capital release of | 165 crore in H1FY21. Also, capex requirements were lower in H1FY21 (| 21.1 crore vs. | 81.0 crore). Negative...

We initiate coverage on Trent Ltd (Trent) with a BUY rating and a Target Price of Rs 786 based on SOTP valuation methodology.