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	5	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.