HSBC, a global brokerage and investment banking firm, slashed its target price on Trent to Rs 6,600 from Rs 6,700 per share. The brokerage firm, however, maintained its ‘Buy’ call on the fashion and retail stock of the Tata Group. This is the second downgrade Trent witnessed in a week. Here are 3 reasons why HSBC cut the target price-
HSBC on Trent: Higher capital expenditure expectations
HSBC notes that higher capex of Rs 1,000-1,500 crore per year is expected to continue for many years. This sustained high level of investment is identified as a key factor directly contributing to the adjustment of financial estimates.
“Given the higher capex, we lower FY27/FY28e EPS by 1%/2%, while revenue and EBITDA estimates are unchanged,’ said HSBC.
Trent targets adding 250 stores annually for several years across all formats (Westside, Zudio, Star, Utsa, Samoh). Zudio’s store addition will be similar to FY25 (net 220 stores), and Samoh could add 10 stores.
“The company brings 200-300 new fashion styles to stores every week in both Westside and Zudio, which in our view dispels the fashion fatigue issue,” added HSBC. Trent believes Star hypermarket can be a larger business than Westside and Zudio. Star is positioned on affordability and private labels (over 70% of assortment), which, on average, are 20-30% cheaper than regular brands in the same category.
HSBC on Trent: Weak growth expectations and muted short-term outlook
Trent’s Q1FY26 revenue came over Rs 5000 crore, growing by just over 20% year-on-year (yoy), below HSBC’s expectations of 34% yoy growth. The “soft demand environment and sourcing issues” impacted this result, with specific mention of supply chain disruptions from Bangladesh, although over 90% of products are manufactured in India.
The company acknowledged that the retail market remains subdued due to geopolitical tensions and the overall consumption environment.
Plus, there is a concern that competition in the value fast-fashion space could impact Trent’s growth and plans for network expansion. Increased competition might also affect the company’s profitability.
The analysts at HSBC said that the “short-term outlook is weak due to weak industry demand and sourcing issues”. While revenue and EBITDA estimates for future years remain unchanged, this softer-than-expected start to the fiscal year and the subdued market conditions likely contribute to a more cautious near-term outlook and overall cut in valuation.
HSBC on Trent: Lowered earnings per share (EPS) estimates
Also, as a direct consequence of the higher expected capital expenditure, HSBC has lowered its earnings per share (EPS) estimates for Trent. Specifically, the FY27 EPS estimate was cut by 1% and the FY28 EPS estimate was cut by 2%.
For the purpose of valuing Trent’s standalone business (which includes formats like Westside and Zudio), the trailing twelve months (TTM) June 2027 EPS figure used for valuation was trimmed from Rs 85.1 to Rs 84.1. This reduction in projected future earnings per share directly impacts the valuation when applying the Price/Earnings (P/E) multiple.
Nuvama downgraded Trent a week back
This comes within a week after Nuvama downgraded Trent over similar issues. The brokerage in its report highlighted that Trent disappointed on near-term growth expectations in its core fashion business, which is expected to deliver 20% growth in Q1 FY26, sharply down from its five-year CAGR of 35% (FY20–25).
Disappointing growth in the near future led to the downgrade, as the existing valuation is overly high. There are significant risks associated with a notable increase in growth potential or improvements in other areas, such as Star Bazaar and Zudio Beauty. Nuvama pushed down Trent to a ‘Hold’ rating from ‘Buy’.
Trent stock performance
Trent’s stock price has fallen 9.4% in the last five trading days. The stock has declined by 7% in the past one month and 20% in the last six months. The share price of Trent has erased 1.7% of the investors’ wealth in the past one year.
