This Tata Group stock has zoomed 210% in FY24; enters top 50 mcap list

The company's market cap crossed Rs 1.5 trillion mark for the first time to hit Rs 1.51 trillion in intraday trade today

Shares of Trent hit a new high of Rs 4,243.65 as they rallied 7 per cent on the BSE in Monday's intraday trade, in an otherwise weak market, on expectation of strong earnings growth. The stock surpassed its previous high of Rs 4,098 touched on February 19, 2024. In comparison, the S&P BSE Sensex was down 0.4 per cent at 73,841 at 11:23 am.

A sharp rally in the stock price pushed Trent in the list of top 50 most valuable companies in terms of market capitalisation (market cap). The company's market cap crossed Rs 1.5 trillion-mark for the first time to hit Rs 1.51 trillion in the intraday trade today. Currently, with a market cap of Rs 1.48 trillion, Trent stands at 49th position in the overall ranking on the BSE listed companies, exchange data shows.

Thus far in the financial year 2023-24 (FY24), the market price of Tata Group firm has zoomed 210 per cent.

The primary customer propositions of Trent include Westside, one of India's leading chains of fashion retail stores; Zudio, a one stop destination for great fashion at great value; and Trent Hypermarket, which operates in the competitive food, grocery and daily needs segment under the Star banner.

Since February 7, Trent has outperformed the market by surging 40 per cent after the company's net profit more-than-doubled to Rs 343.60 crore in the December quarter (Q3FY24) on healthy operational performance. The company, which operates a portfolio of retail concepts, posted a net profit of Rs 160.92 crore in the same quarter last year (Q3FY23).

Trent's standalone revenue grew 52 per cent year-on-year (Y-o-Y) at Rs 3,521 crore as against Rs 2,319 crore in the previous year quarter. Overall, operating earnings before interest and tax (Ebit) margin improved to 13 per cent for Q3FY24 from 8.5 per cent in Q3FY23.

In a challenging environment across categories Trent saw strong demand momentum indicating successful marketing strategy driving value-for-money customers, sharp price points leading to customer traffic, and right store matrix, analysts said.

"Trent's strong performance with 10 per cent LFL growth and robust footprint additions remains an outlier within our retail coverage universe that is witnessing a challenging demand environment. Unlike peers that passed on the sharp raw material (RM) price increases last fiscal, Trent absorbed the impact, seeing strong customer reception and is now reaping the benefits as raw material prices turn benign. Further, despite adding stores aggressively, the company has observed limited balance sheet risk or weakness in operations," Motilal Oswal Financial Services (MOFSL) had said in the Q3 result update.

Trent's industry-leading revenue growth, driven by healthy SSSG and productivity, robust footprint additions, and healthy scale up within the Zudio, offer a huge runway for growth over the next three to five years.

The company’s grocery segment, Star, with merely 67 stores and an annualised revenue of Rs 2,690 crore (FY24E) is seeing strong LFL growth. This presents a huge opportunity for growth. Its own brand strategy and curated range are witnessing strong customer reception, the brokerage firm said. The stock hit MOFSL’s target price of Rs 4,200 per share.

Analysts at Axis Securities, meanwhile, believe Trent’s outstanding performance in the last many quarters despite weak consumer demand is commendable. The brokerage firm 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," analysts said in their result update.