Nuvama slashed the target price on Trent by 11.2% to Rs 5,884 from Rs 6,627 on the back of a slowdown in its core business’s growth. The brokerage house downgraded the stock to a ‘Hold’ rating from ‘Buy’. Following this, Trent’s share price plunged as much as 8.7% to an intra-day low of Rs 5,652 on the National Stock Exchange, commanding the seat of the major loser in the Nifty 50.
Nuvama on Trent: Disappointment in growth
“At its Annual General Meeting (AGM), 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),” said Nuvama.
Trent’s management reaffirmed their aspiration of 25%-plus growth for the coming few years, but according to Nuvama, the current run rate falls short of it.
Following the near-term growth expectations, Nuvama cuts revenue estimates by -5% for FY26 and -6% for 27, while for EBITDA by -9% and -12%, respectively.
Nuvama on Trent: Headwinds prompted downgrade
The current run rate even falls short of management’s aspiration of 25% growth for the next few years. “This forces us to re-evaluate the growth targets for the company and align them with the current run rate,” said Nuvama. Underwhelming near-term growth prompted the downgrade as the current valuation is too demanding. A significant jump in growth profile, or a pickup in other levers, i.e. Star Bazaar, Zudio Beauty, remains the key risks.
Nuvama on Trent: Stability crucial for Zudio
Nuvama thinks that the pickup in Zudio Beauty and the Star business can become the next big growth levers, but these businesses first need to stabilise before scaling up.
Out of all this, the positive was that at Trent’s AGM, management reaffirmed the vision to scale up revenue by 10 times in a not-too-distant future. The company cited that the revenue has already doubled since the vision was laid down in FY23. This growth will be backed by robust additions of 250 stores across formats as per management guidance, whose tone has historically been conservative.
“Accordingly, we remain confident of management beating this, given the execution track record. Management is currently doing the spadework for Zudio Beauty, which, once stabilised, can be rapidly scaled up the Zudio. Star Bazaar too shall follow this template,” said Nuvama.