Stock of this Tata Group company has doubled in the past 10 months

Shares of Trent rose 3 per cent to a fresh high of Rs 2,492 on the BSE in Wednesday’s intra-day trade. The stock has surged 12 per cent in the last two days after the company reported strong results for the Sept quarter (Q2FY24).

In the past two weeks, the stock of the Tata Group company, which operates a portfolio of retail concepts, has rallied 25 per cent. While it has more than doubled or zoomed 104 per cent in 10 months from a level of Rs 1,220.05 on January 9.

Trent on Tuesday reported a strong 55.6 per cent year-on-year (YoY) jump in its Q2 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.

Trent’s strong performance with 10 per cent like-for-like (LFL) growth and robust footprint additions remains an outlier within our retail coverage universe that is witnessing a challenging demand environment, according to Motilal Oswal Financial Services (MOFSL).

Unlike peers, which passed on the sharp raw material price hikes to customers last fiscal, Trent absorbed the impact seeing strong customer reception and is now reaping the benefits as raw materials price turns benign, as per MOFSL. 

Further, despite adding stores aggressively, the company has observed limited balance sheet risk or weakness in operations, the brokerage said in a result update.

"Trent’s industry-leading revenue growth was driven by healthy SSSG and productivity, robust footprint additions, and a healthy scale-up opportunity within Zudio, which offers a huge runway for growth over the next 3-5 years. The company’s grocery segment Star, with merely 65 stores and annualized revenue of Rs 1,810 crore (FY23), presents a huge opportunity to support growth. Its own brand strategy and curated range are seeing strong customer traction," MOFSL said.