Trent Gets 'Outperform' Rating As Macquarie Sees It As 'Standout Player In India's Retail Space'

Macquarie has initiated coverage on Trent Ltd. with an 'Outperform' rating and a target price of Rs 7,000, offering a 35% upside from current levels. The brokerage highlights Trent as a standout player in India's retail space, especially within the value to mid-premium fashion segment, and expects this growth to continue, buoyed by several tailwinds.

Trent stands out in Asia's fashion retail sector, surpassing peers in growth, returns, and inventory management, the brokerage said in its note on Thursday. Over financial year 2023-2025, Trent has achieved an impressive 45% sales CAGR, margin expansion, and a 3x increase in Return on Capital Employed, reaching 30%.

The company's strategic balance between fashion risk and profitability, driven by frequent style drops and a robust expansion strategy through owned and franchised stores, has contributed to stellar performance, according to Macquarie.

Trent benefits from its strong supply chain and local design capabilities, developed through years of experience in India's fashion market, according to the note. These advantages are tough to replicate, giving the company a sustainable edge.

Additionally, Zudio, Trent's value fashion brand, has expanded rapidly with nearly 700 stores. There's significant growth potential here, particularly when compared to competitors like Reliance Trends, which operates over 2,000 stores.

Macquarie also believes fears over Shein's entry into the Indian market are overblown, as it would be challenging for Shein to match India's local supply chain advantages.

Trent's expansion of Zudio, alongside improving return ratios and reducing losses in its Star Bazaar grocery format, positions the company for long-term growth. Macquarie views current consumer sentiment as an attractive entry point for investors.

Macquarie also presented a bull case scenario where the target price could rise to Rs. 10,000, driven by even faster-than-expected growth, enhanced profitability, and broader market share gains. This would be a result of Trent's continued execution of its expansion strategies, particularly the scaling of Zudio and gradual improvements in its Star Bazaar grocery format.