Jefferies has maintained its ‘Hold’ rating on Trent. The brokerage house has slightly raised the target price to Rs 6,000 from Rs 5,900, implying an upside of 13%. Trent is a structured story on the growing organised apparel market in India. “However, an expensive valuation keeps us on the sidelines,” said Jefferies.
Jefferies on Trent: Margins a surprise
According to the brokerage house, margins, however, surprised positively despite a decline in per sqft revenue & gross margin. This is due to the lower cost that allowed per-unit EBITDA to stay almost flat, which is difficult to understand given the lack of adequate disclosures.
However, Trent’s revenue growth decelerated to a multi-quarter low of 20%. Also, Jefferies said it is yet to understand the reason for a 7% YoY decline in staff costs despite a more than 30% increase in retail footprint. Trent’s consolidated revenue growth was also at similar levels.
“While Zudio led the growth, sequential growth moderation continued for both Zudio and Westside on account of base expansion, heightened competitive intensity, and weak demand, in our view,” said Jefferies.
Trent only added one store in the first quarter of FY26; net store additions were muted. The total Zudio stores stand at 766, and no net addition in Westside. Its total stores stand at 248. However, both formats reported an area addition of 0.1 million each, implying stores opened were of larger size than the ones closed.
Jeferries’ base case for Trent
In the base scenario, Jefferies expects a 30% CAGR in standalone sales over FY25-28. Zudio format is likely to see an accelerated ramp-up. Standalone EBITDA margin sees a healthy expansion over FY25-28.
Jefferies: Key risks for Trent
Meanwhile, in the downside case, the brokerage house expects a 33% CAGR in standalone sales over FY25-28. While the share of online would grow, Trent faces aggressive competition from e-commerce majors in this channel.
“We continue to seek improved disclosures to better appreciate the business drivers,” said Jefferies.