Market-cap of this Tata Group stock nears Rs 1 trillion; surges 24% in Nov

Trent's market cap touched Rs 98,399 crore in intra-day trade on Thursday as the stock hit a new high of Rs 2,768 on the BSE

Shares of Trent gained 3.4 per cent to hit a new high of Rs 2,768 on the BSE in Thursday’s otherwise intra-day trade. The BSE Sensex was down 0.33 per cent at 66,683 at 12:41 PM.

So far in November, the stock of the Tata Group firm, which operates a portfolio of retail concepts, has outperformed the market by suring 24 per cent on healthy September quarter (Q2FY24) earnings. In comparison, the benchmkar index gained 4.5 per cent during the month.

A sharp run up in the stock price has led the market capitalisation (market cap) of Trent closer towards the Rs 1 trillion-mark. Trent’s market cap touched Rs 98,399 crore in intra-day trade today, BSE data shows.

When reached, Trent will be the fifth Tata Group company to achieve Rs 1 trillion market cap.

Tata Consultancy Sevices is on top of the list with a market cap of Rs 12.8 trillion, while Titan Company stood second with a market cap of Rs 3.07 trillion, followed by Tata Motors (Rs 2.32 trillion) and Tata Steel (Rs 1.57 trillion), data shows.

Trent is a retail operations company that owns and manages a number of retail chains in India. It is engaged in retailing / trading of apparels footwear accessories toys games etc. It operates through 'Westside' 'Landmark' 'Zudio' and Utsa retail formats.

Trent delivered its best-ever performance in tough time. The result was an outlier in the overall sector in the recent quarter. 

For Q2FY24, the company had reported a strong 55.6 per cent year-on-year (YoY) jump in its standalone net profit to Rs 289.70 crore driven by robust revenue growth, which was led by aggressive store additions in Zudio and 10 per cent LFL growth.

It had posted a profit of Rs 185.90 crore in the year ago quarter.

Revenue grew 59 per cent YoY to Rs 3,063 crore in Q2. The company’s profit before tax rose 54 per cent YoY to Rs 375 crore against Rs 243 crore in Q2FY23.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, at 15.9 per cent, saw an expansion of 120 bps YoY for the reporting quarter.

Trent said the company’s strategic choices continued to drive revenue growth in Q2FY24 amidst relatively subdued market conditions.

Operating discipline coupled with focus on execution supported its expansion agenda. Change in the revenue profile across formats remains aligned with the company’s strategic objectives and plans, Trent said.

Analysts at Axis Direct believe Trent’s outstanding performance despite weak consumer demand is commendable.

The brokerage said it further expects strong sales growth to continue in the coming quarters as Trent focuses on rapid store expansion and continued assortment renewal, which will result in higher overall footfall.

In addition, the improvement in the earnings profile across all formats, the reduction in losses at Star Bazaar and the improvement in traction at Inditex JV are also positive signs for the company.

In recent years, the company has followed the small-format store model in Star Food. This, combined with sharp pricing and a focus on fresh produce and private labels has led to positive results.

This model is resilient and demonstrates strong commercial viability, the brokerage said. The stock is trading above its target price of Rs 2,750 per share.

The slower-than-expected pick-up in discretionary consumption, rise in competitive intensity from peers (Reliance Trends, Max, Pantaloons etc.) and execution challenges in Zudio are among key downside risks for the stock, analysts say.