Trent Vs Page Industries Vs Vishal Mega Mart: Here's HSBC's Top Pick

HSBC has initiated coverage on Trent Ltd., Vishal Mega Mart Ltd., and Page Industries Ltd., according to a report on Friday. In its scorecard, Trent and Vishal Mega Mart score the highest under the apparel segment.

India's apparel sector expanded at an 11% CAGR over FY20-24, in line with nominal GDP and private final consumption expenditure growth, according to the brokerage.

"Driven by increasing penetration and affordability, the branded segment has seen a 16% CAGR over FY12-24 and is expected to clock an 11% CAGR over FY24-29," it said.

HSBC highlighted apparel, though, remains a competitive market disrupted by e-commerce, foreign brands, and changing fashion cycles. It preferred value fashion formats given the size of the retail opportunity and limited disruption from e-commerce.

HSBC initiates a 'buy' rating for Trent with a target price of Rs 6,700 due to the company's overall growth outlook. "We initiate a buy with an SOTP-based target price of Rs 6,700 with an industry-high target of 75 times PE for the standalone business," it said.

"While competition is increasing, we don't expect rivals to dent Zudio's market leadership given its strong brand, fashion collection refresh frequency, and store reach. For Zudio we forecast a revenue CAGR of 31% over FY25-28," it added.

The brokerage believes Zudio will keep expanding and forecasts over 200 new stores a year over FY25-28. Longer term, the total number of stores can reach 1,450 stores, up from the current 765, it said.

Key downside risks include intense competition and cannibalisation from new stores in existing cities.

HSBC has initiated a 'reduce' with a target price of Rs 41,450, based on a target PE multiple of 50 times. "We initiate with a 'reduce' rating, as we believe slower growth and increasing competition could further weigh on Page's valuation," it added.

"We expect topline growth to remain moderate as all three segments are missing drivers, unlike the past when at least one of the segments achieved above-average growth. Our PAT estimate for FY27e is 6% lower than Bloomberg consensus," the brokerage said.

HSBC expects Page Industries' growth to moderate as the market share expansion in men's innerwear is moderating, given Jockey's high penetration rate and increasing competition from smaller rivals.'

"Page's overall FY25-28e revenue is expected to slow to a CAGR of 10%. With our trailing 12 months, June 2027 EPS estimate of Rs 829, we derive our fair value target price of Rs 42,450, implying 10% downside," it said.

The key upside risk includes a pick-up in growth, especially in the athleisure segment.

HSBC has initiated a 'hold' rating for Vishal Mega Mart, as it believes that the valuation already reflects the superior execution and large total addressable market.

"We value the stock on a forward PE-based valuation and assign a target multiple of 65 times based on our trailing 12 months June 2027 EPS estimate of Rs 2.12, yielding a target price of Rs 138," it said.

The brokerage expects the company's RoCE profile to remain strong at 60% in FY28, with internal cash generation sufficient to fund capex.

Vishal Mega Mart currently has 696 stores, and HSBC forecasts this to reach 940 by FY28 as it increases store density and expands into new cities. "Our analysis puts the Vishal Mega Mart longer-term store count at 1,300," it said.

The brokerage highlighted that the company's business model is particularly well protected due to its diversified product mix, high non-metro exposure, low average selling price with entry-level price point leadership and high private label share.

The key upside risks include private labels boosting margins and better cost control. Meanwhile, the key downside risks include rising competition and slower-than-expected store expansion.