Equirus Downgrades This Tata-Group Stock To 'Reduce' On Premium Decline

Equirus downgraded Tata-Group's Trent Ltd. to Reduce as it expects that the premium will decline on slowing growth. The target price is Rs 4,474 apiece, which implied 5% downside from Monday's close.

Trent delivered exceptional topline compounding of 39% and 28% over the last five and 10 years, respectively. The street rewarded the hyper growth handsomely, which is reflecting in Trent's valuation profile. Its five-year average one-year forward P/E multiple hovering around 95x times, Equirus said.

The inflection point for Trent's growth was the launch of Zudio, the brokerage said. Zudio's stellar run culminated in crossing the billion dollar mark in financial year 2025.

However, the growth run is appearing to be fizzling out. The second quarter of the financial year 2026 is poised to be the fifth consecutive quarter of sequential moderation in Trent's topline growth.

Trent Ltd. reported a 17% year-on-year increase in standalone revenue in the second quarter of financial year 2025, reaching Rs 5,002 crore. This compares to Rs 4,260 crore in the same period last year, according to a filing with the stock exchanges on Monday.

Trent's standalone revenue growth in July–September marks the lowest performance in past 18 quarters. It has also underperformed peers like VMart and V2, according to Equirus. The brokerage sees valuation compression ahead despite recent correction.

The fashion portfolio's like-for-like growth, once in double digits during first quarter in the previous financial year softened to low single digits in first quarter in financial year 2026, as per Equirus Assessment, which is likely to remain flattish in second quarter.

Trent's Ebitda margins expanded by 165 basis points in the first half of the calendar year 2025 as moderate increase in employee and rental expenses supported. The Ebitda margin expansion occurred despite an unfavourable mix resulted in 183-bps contraction in gross margins, the brokerage said.

Equirus is expecting that Trent's Ebitda margin will expand 94 basis points expansion for the entire financial year 2026. Trent may benefit in the third quarter because of the festive season.

However, street's expectation of a 26% topline CAGR over FY25-27E appeara unachievable, against the backdrop of earnings downgrades and visible growth moderation, Equirus said.