Trent Q2 Review - Robust Growth, Albeit Weaker Than Lofty Expectations On Store Consolidation: Motilal Oswal

Motilal Oswal Report

Trent Ltd. continues to buck the trends, with strong double-digit like-for-like growth and robust store area additions, despite a weak discretionary demand.

Trent’s industry-leading growth, driven by healthy same-store sales growth, store productivity, and robust footprint additions, along with the scale-up of Zudio and newer categories (Beauty, Lab-grown diamonds), offer a huge runway for growth over the next few years.

Further, Trent’s focus on ramping up Star (currently 74 stores in 10 cities) through Fresh and its own brands, provide an additional growth driver in the grocery segment.

We lower our standalone FY25-26E revenue and Ebitda estimates by 5-6%, while our PAT estimates are broadly unchanged on lower finance cost and higher other income.

We build in a CAGR of 34%/37%/30% in standalone revenue/Ebitda/PAT over FY24-27, driven by a robust 21% CAGR in-store addition and healthy SSSG.

We assign 60 times Dec’26 EV/Ebitda to the standalone business (Westside and Zudio; premium over our Retail Universe, given its superlative growth), three times Dec’26 EV/sales to Star joint venture, and eight times EV/Ebitda to Zara joint venture to arrive at our target priceof Rs 8,200. Adjusting the value of Star and Zara, the stock is trading at 75 times Dec’26 PE for the Standalone business (versus 88 times long term average 1-year forward PE). We reiterate our Buy rating.

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