Shares of Tata Group‑owned Trent Ltd. have surged nearly 9% over the past two trading sessions, reaching a five‑month peak of ₹6,214.55 on June 23—outperforming the broader market amid renewed investor optimism.
What’s Fueling the Rally?
1. BSE Sensex Inclusion Triggers Passive Inflows
Trent was officially incorporated into the BSE Sensex index on June 23, prompting estimated passive fund inflows of around US $330 million, per analysts at Nuvama Alternative. This has boosted liquidity and demand in the stock, evident from a fourfold jump in trading volumes (~2 million shares).
2. Strong Performance of Zudio Brand
Brokerages, including HSBC and Elara Capital, credit the momentum to the rapid scaling of Zudio, Trent’s value fashion chain, along with robust strategy execution and brand extension.
3. Significant Analyst Upgrades
- HSBC Global Research initiated coverage with a ‘Buy’ rating and ₹6,700 target, projecting ~19% upside based on Zudio’s growth potential.
- Elara Capital maintained its ‘Buy’ stance, citing expansive sourcing, store footprint growth, and simplified retail operations as tailwinds.
- Institutional brokerages like Morgan Stanley, Macquarie, and Citi have similarly endorsed the stock, envisioning 25%+ revenue CAGR and significant margin expansion.
Financial & Operational Highlights
- FY25 Standout Performance: Fiscal ended March 2025 saw standalone revenue rise 38%, while net profit jumped 10% to ₹1,584.8 crore.
- Robust Margins: 30 basis point YoY increase in EBITDA margin to 16% in Q4, with EBITDA at ₹656 crore—surpassing the ₹580 crore estimate.
- Strong Balance Sheet: Trent maintains low debt levels and strong operating leverage, enabling efficient returns on capital.
Strategic Growth Drivers
- Store Expansion: Trent now spans 14+ million sq. ft., encompassing its multi-brand portfolio of Westside, Zudio, Star, and others.
- Category & Format Diversification: Plans to tap adjacent sectors like beauty, innerwear, footwear, and micro-markets, while launching Zudio Beauty.
- Tech & Supply-chain Edge: Benefits from revitalized retail infrastructure, quicker inventory turns, and lower A&P costs by leveraging shared tech across brands.
Valuation Snapshot
- HSBC’s ₹6,700 target implies ~19–20% upside from ₹5,951 closing price.
- Morgan Stanley & Macquarie expect 10× growth journey by FY32, with price targets ranging from ₹6,359 to ₹7,200.
- Citi projects share price up to ₹7,600 backed by store expansion and faster ramp-up .
Though the stock trades at ~PE 140x, analysts argue its growth-outperformance, RoCE, and retail potential justify the premium.
Risks to Monitor
- Elevated Valuation: Valuation significantly higher than peers; near-term profit-taking is possible.
- Competitive Pressures: Threat from quick commerce players in Star grocery format noted by Macquarie.
- Retail Vulnerability: Discretionary spending may be impacted by macroeconomic headwinds.
Investor Outlook
| Investor Type | Rationale |
|---|---|
| Long-term | Back growth story: Zudio, platform leverage, margin expansion, index inclusion |
| Short-term | Trader interest driven by inflows and analyst upgrades; volatility ahead |
Conclusion:
Trent’s recent rally is rooted in a powerful combination of structural growth—led by Zudio scaling—strong fundamentals, index-driven passive flows, and analyst optimism. While the valuation premium demands justified performance, the current catalysts suggest continued investor interest. Investors should weigh growth potential against market volatility and shifting consumer dynamics.
Also Read: Oswal Pumps Shares Slip 8% Below IPO Price After Lackluster Debut
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