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Motilal Oswal Report
The discretionary category continues to see muted demand, but Trent Ltd. has far outpaced the industry. It delivered industry-leading like-for-like growth of 10% and hence gained market share over other retailers in the apparel segment (especially in value format).
Further, despite aggressive store addition, it has limited balance sheet risk or weakness in operations. Trent’s industry-leading revenue growth is mainly driven by:
strong same-store sales growth and productivity,
healthy footprint additions, and
Zudio’s strong value proposition.
Trent’s successful store performance, healthy store economics, and aggressive growth strategy offer a huge runway for growth over the next three-to-five years. Star’s improving store metrics further offer a further opportunity.
We have raised our standalone revenue/Ebitda estimates by 4%/6% for FY25/FY26, factoring in higher store addition for Zudio.
We estimate a CAGR of 36%/34% in standalone revenue/Ebitda over FY24-26, led by 23% store addition and healthy same-store sales growth, which justify the premium valuation for the stock.
We have ascribed 54 times to standalone business, two times enterprise value/sales to Star Bazaar, and 15 times EV/Ebitda to Zara to arrive at our target price of Rs 5,500. Adjusting Star’s and Zara’s values, the stock is trading at 82 times FY26E EPS for the standalone business. Retain Buy.
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Also Read: Mankind Pharma - Disruptor With A Dose Of Care; Motilal Oswal Initiates Coverage With A Buy
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