Buy TRENT LTD share; target of Rs 1,180: AXIS SECURITIES

BRIEF SUMMARY OF AXIS SECURITIES RESEARCH REPORT ON TRENT LTD SHARE 

Trent Ltd share has been an early entrant in India’s organized retail sector and is a part of prestigious Tata group of companies. 

Trent Ltd share operates its outlets through 5 formats. 

In the industry of fashion, Trent Ltd share functions with the help of Westside, Zudio and Zara JV. 

Trent Hypermarket has its footprint in competitive food, grocery and essentials segment under the Star Bazaar JV and also Landmark stores which are family entertainment format stores. 

INVESTMENT RATIONALE BY AXIS SECURITIES 

A key focus on accelerated store expansion: 

The fashion business of Trent Ltd share reported a superb recovery in H1FY22 and Axis securities expects that there would be a continuation in H2FY22 due to a strong festive and wedding season buying by the consumers. 

This would pave a profitability path for the company after witnessing a major impact due to the pandemic. 

There is an indication from the management that they would continue their focus on expansion of stores and would try to achieve 100 stores per annum of Westside and Zudio in the next few years. 

Trent Ltd share has around 195 Westside stores and 160 Zudio stores that are operating with additional stores ready to open and would be started when certain approvals will be obtained. 

If the expansion of Westside will continue in same fashion, then it will achieve a sustained 7-8% SSSG (Same stores sales growth). Zudio could potentially increase beyond 21% in FY21 which in FY20 was less than 15%. 

New growth driver in the form of Zudio’s value fashion: 

By the management of Trent Ltd share there is an indication that the Zudio format would be scaled up and would target youth between 15-25 years. 

Zudio offers trendy products with great deals and would normally cost below ₹ 999. 

This Zudio format has recently achieved superb profits with a gross margin of around 40%. 

Zudio has become profitable due to the backend processes and infrastructure aligned with Westside. 

Probable sharp improvements from Q3FY22E: 

With engagement with property partners, the management of Trent Ltd share continues to focus on reduction in rental and other expenses. 

The company is increasing the scale of operations and also focusing on cost saving initiatives. 

Trent Ltd share could report tremendous improvement in margins of Q3FY22 and Q4FY22. 

QUARTERLY RESULTS 

Figures in Cr 

Quarterly Results Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 
Sales  855 988 843 248 585 854 906 492 1,178 
Expenses  738 821 794 411 601 682 801 557 968 
Operating Profit 117 168 49 -163 -16 171 105 -65 210 
OPM % 14% 17% 6% -65% -3% 20% 12% -13% 18% 
Other Income 43 51 43 55 36 45 67 41 57 
Interest 61 61 62 60 60 64 64 71 75 
Depreciation 61 63 67 64 63 63 68 69 73 
Profit before tax 38 94 -37 -232 -103 90 40 -164 119 
Tax % 55% 48% 109% 21% 24% 29% 56% 16% 33% 
Net Profit 19 54 13 -178 -72 74 29 -127 93 
EPS in Rs 0.52 1.52 0.36 -4.99 -2.01 2.08 0.82 -3.56 2.6 

BALANCE SHEET 

Figures in Cr 

Balance Sheet Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Sep-21 
Share Capital  33 33 33 33 33 33 36 36 36 
Reserves 958 1,389 1,431 1,514 1,562 1,613 2,352 2,277 2,213 
Borrowings 332 267 400 392 391 494 300 300 3,523 
Other Liabilities  614 518 292 283 349 418 2,819 3,111 517 
Total Liabilities 1,936 2,207 2,157 2,222 2,336 2,559 5,507 5,724 6,289 
Fixed Assets  720 668 477 549 613 662 2,738 3,054 3,398 
CWIP 138 92 55 10 87 23 108 104 
Investments 300 740 1,067 1,080 1,023 883 1,515 1,487 1,410 
Other Assets  778 706 558 588 691 927 1,230 1,075 1,377 
Total Assets 1,936 2,207 2,157 2,222 2,336 2,559 5,507 5,724 6,289 

SHARE HOLDING 

Share Holding Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 
Promoters  37.01 37.01 37.01 37.01 37.01 37.01 37.01 37.01 37.01 
FIIs  20.98 20.9 21.18 20.86 23.13 29.41 29.9 30.28 30.13 
DIIs  15.89 15.86 15.59 15.93 14.63 10.03 10.27 10.68 11.15 
Public  26.12 26.23 26.22 26.2 25.24 23.55 22.83 22.03 21.71 

Axis Securities recommends to BUY Trent Ltd share with a TP of Rs 1,180/share. 

Disclaimer  

This stock has been analyzed and recommended in the brokerage report of Motilal Oswal. Financial losses can occur when equity investing is done. Investors should exercise due caution while dealing in equities. LearnTwoTrade as well as the author are not liable for any losses caused as a result of decisions based on the article. 

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