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Trent Q4 Results Review- Delivering Consistent Industry Outperformance With Enhanced RoE Profile: ICICI Direct

Despite a challenging demand environment, Trent continues to remain insulated with industry best growth rates driven by Zudio.

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ICICI Direct Report

Despite a challenging demand environment, Trent Ltd. continues to remain insulated with industry best growth rates mainly driven by Zudio format.

Revenue grew 75% YoY to Rs 2077.1 crore (our estimate: Rs 1920.1 crore) on a favorable base. On a three-year compound annual growth rate basis, revenue growth was at an impressive 42%, which is the highest among other lifestyle retailers.

Owing to increase in share of Zudio format, Trent recorded one of its lowest gross margins of 40.8% (down 830 bps YoY, Zudio yields lower gross margins but has superior asset turn).

However, on account of positive operating leverage, Ebitda margin contraction was restricted to 264 bps YoY to 10.2% (our estimate: 12.1%).

Despite lower than anticipated margins, absolute Ebitda was at Rs 212 crore (our: Rs 232 crore) with three-year CAGR of 32%.

Key triggers for future price performance:

  • We pencil in 215 store additions between Westside and Zudio for FY24-25E.

  • Liquidity position remains strong with cash and investments worth Rs 600 plus crore that will enable it to tide over the current situation better than peers.

  • Zudio continues to be the growth engine for Trent.

  • We expect revenues to grow at a CAGR of 27% in FY23-25E.

  • In the long run, Trent aims to grow its revenue at CAGR of 25% plus.

Click on the attachment to read the full report:

ICICI Direct Trent Q4FY23.pdf
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