Brokerages largely retained their positive view on Trent Ltd. after the Tata Group retailer reported better-than-expected first quarter earnings for FY27, with analysts applauding another strong margin performance while cautioning that faster revenue growth remains the key trigger for further stock re-rating.
Management said consumer demand remains stable, although discretionary spending is "measured rather than exuberant." Like-for-like growth in the fashion portfolio stayed in the low single digits, while expansion continued to be skewed towards Tier II and Tier III markets, where newer stores typically take longer to mature.
Trent Q1 Results - YoY
- Net profit up 25.8% at Rs 532 crore vs Rs 423 crore YoY
- Revenue up 18.5% at Rs 5,666 crore vs Rs 4,781 crore YoY
- EBITDA up 32.5% at Rs 1,110 crore vs Rs 838 crore YoY
- EBITDA margin at 19.6% vs 17.5% YoY
Morgan Stanley maintained its Overweight rating with a target price of Rs 3,151, saying the EBITDA beat was encouraging, though a sustained improvement in top-line growth remains important. Macquarie also retained its Outperform rating and a target price of Rs 3,600, attributing the margin beat to a richer mix of higher-margin Westside sales.
Bernstein remained constructive with an Outperform rating as well, and a Rs 3,500 target price, saying Trent continues to deliver on store additions, profitability and steady growth. Jefferies maintained a Hold rating and raised its target price to Rs 3,435.
Citi, the lone bear among major brokerages, retained its Sell rating despite raising its target price to Rs 2,950.
ALSO READ: Trent Q1 Results: Net Profit, EBITDA Top Street Estimates As Margins Expand
Brokerages on Trent
Morgan Stanley
- Maintain Overweight; Target Price: Rs 3,151.
- Q1 EBITDA beat estimates, though improvement in top-line growth remains the key monitorable.
- Consumer sentiment remained broadly positive in Q1, although the duration and intensity of the Middle East conflict could have near-term implications.
- The company continues to mitigate cost pressures through calibrated price hikes and supply-chain cost-saving initiatives.
Citi
- Maintain Sell; Hike target price to Rs 2,950 from Rs 2,733.
- Margins continue to impress, but faster growth remains elusive.
- Believes sustained acceleration in growth will be key for valuation multiples to hold or re-rate.
- Continues to like Trent's business model and execution but awaits a more attractive valuation.
Jefferies
- Maintain Hold; Hike target price to Rs 3,435 from Rs 3,110.
- Strong margins were offset by a cautious management outlook.
- Like-for-like (LFL) growth remained in the low single digits, partly due to store densification.
- Management sounded cautious on near-term demand amid geopolitical uncertainty.
- Higher commodity prices could weigh on demand and disrupt the supply chain.
- The company is already witnessing cost inflation.
Macquarie
- Maintain Outperform; Target Price: Rs 3,600.
- Q1 performance points to resilient demand.
- Believes a higher share of premium Westside sales drove the gross margin beat.
- Clarity on FY27 store additions and constructive demand commentary support a positive sales outlook.
- Sees multiple levers to manage input costs and sufficient lead time to implement price changes.
- Expects the impact of input cost inflation on margins to remain limited.
Bernstein
- Maintain Outperform; Target Price: Rs 3,500.
- Delivered another profitability beat, though the growth reboot is still unfolding.
- Trent has delivered on store additions, maintained growth and continued to expand margins.
- Expects steady-state growth of 18-20%.
- Remains cautious on near-term macro headwinds.
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