Goldman Sachs has slashed the price target of Tata Group's flagship retail divion Trent Ltd. citing a muted like-for-like growth and potential elevation in raw material inflation going ahead.
The brokerage has cut price target to Rs 2,960 from Rs 3,000, implying a downside of over 1%. However, GS has maintained a 'neutral' rating for the stock.
GS flagged muted LFL growth, expansions of stores in tier two and tier three cities where sales throughput is lower, and a possible elevated Raw Material Inflation as reasons for its downward assessment.
Therefore, the brokerage underlined that sales growth could miss consensus estimates in FY27, even as company may try to mitigate RM inflation through a better mix.
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Macquarie Split
Macquarie has a slightly contrarian view on the company and has maintained its 'Outperform' rating with target price of Rs 3,600. In its research note, the brokerage highlighted discussions with the management as reasons for its view.
Following a recent meeting with Trent's management, the brokerage said like-for-like growth is likely to remain under pressure until the share of new store additions in smaller towns stabilises.
However, slower like-for-like growth may not have a material impact on Trent's margin profile, as operating costs are lower in smaller towns, according to Macquarie.
The management has also reiterated its target of adding 200-250 stores annually, highlighting its continued focus on expanding the retail footprint.
Macquarie said it remains positive on Trent's approach of balancing profitability with growth. The brokerage also noted that the company has multiple margin levers at its disposal, which gives it confidence in its ability to manage near-term input cost pressures.
The brokerage expects the healthy demand environment to support Trent's growth outlook despite the near-term moderation in like-for-like growth.
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