This Tata Group stock has doubled investor wealth thus far in 2024

Multibagger stocks: Trent share price has rallied more than 100 per cent for a second straight calendar year

Trent share price today hit a new high of Rs 6,845.40, rising 1 per cent on the BSE in Thursday's intraday trade. Trent share price extended its rally after the company reported a healthy set of numbers for the June 2024 quarter (Q1FY25). Analysts anticipate the company to show continued strong performance in the coming quarters.

In the past 11 trading days, the stock price of the Tata Group company has surged 32 per cent after it posted 133 per cent year-on-year (Y-o-Y) jump in its standalone profit before tax (PBT) at Rs 450 crore in the June 2024 quarter (Q1FY25). The company had posted PBT of Rs 193 crore in the year ago quarter (Q1FY24).

 

Thus far in the calendar year 2024, Trent share price has zoomed 124 per cent. The stock had delivered 126 per cent return in the previous calendar year 2023.

Trent is part of the Tata Group and operates a portfolio of retail concepts. The primary customer propositions of Trent include Westside, Zudio, and Trent Hypermarket, which operates in the competitive food, grocery and daily needs segment under the Star banner. 

Trent now operates 228 Westside stores and 559 Zudio stores across 178 cities.

The company achieved robust revenue growth in Q1FY25 as the top-line increased by 57 per cent Y-o-Y to Rs 3,992 crore. This growth was driven by increased footfalls, and strong performance across brands, concepts, categories, and channels, despite subdued market sentiments and heightened competitive intensity.

It has seen a 39 per cent compounded annual growth rate (CAGR) on revenue and PBT over Q1FY20. 

The company's earnings before interest, tax, depreciation and amortisation (Ebitda) grew by 67 per cent Y-o-Y, with Ebitda margins expanding by 88 bps Y-o-Y to 15.3 per cent, driven by gross margin expansion.

Trent is seeing strong pick-up in new initiatives/ categories through increased contribution from online sales and emerging categories. An accelerated store expansion programme, increased contribution from the online channel, and a pick-up in foods business will augur well in the near term, according to analysts.

Analysts at Axis Direct remain positive on the company and expect Revenue/Ebitda growth of 25 per cent/28 per cent CAGR on a standalone business over FY24-27E.  

Analysts believe Trent's outstanding performance over the past several quarters, despite weak consumer demand, is commendable. They expect strong sales growth to continue in the coming quarters, driven by Trent's focus on rapid store expansion and ongoing assortment renewal, which should result in increased overall footfall. 

Additionally, the improvement in the earnings profile across all formats, the reduction in losses at Star Bazaar, and the enhanced traction at the Inditex JV are positive indicators for the company. 

In recent years, Trent has adopted a small-format store model for Star Food. This approach, coupled with sharp pricing and a focus on fresh produce and private labels, has yielded positive results. The resilience and commercial viability of this model are evident in its performance, the brokerage firm said. It maintains a ‘buy’ rating on Trent with a target price of Rs 7,000 per share.

Motilal Oswal Financial Services, meanwhile, had said in its Q1 result update that Trent's strong performance with double-digit LFL growth and robust footprint additions remains an outlier within our retail coverage universe, which is witnessing a challenging demand environment. 

"Unlike peers that passed on the sharp raw material price increases last fiscal, Trent absorbed the impact, seeing strong customer reception and is now reaping the benefits, as raw material prices turn benign. Trent’s industry-leading revenue growth, driven by healthy SSSG and productivity, robust footprint additions, and healthy scale-up of Zudio, offers a huge runway for growth over the next three to five years," the brokerage firm said with a 'buy' rating on the stock with a target price of Rs 7,040 per share.

Meanwhile, in the near term, revenue growth for the branded retail and apparel companies is likely to be largely driven by store expansion, steady demand for premium products and better consumer sentiments in urban markets/metros. 

In the medium to long term, market share gains, higher traction on the e-Commerce platform, a strong retail space expansion strategy and sustained expansion of product portfolio will help branded apparel and retail companies post consistent growth. Better operating leverage, improved efficiencies and improved mix would help branded apparel & retail companies to post higher margins in the coming years, the brokerage firm Sharekhan said in a recent note.