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Trent Ltd, a subsidiary of the Tata Group, experienced a significant surge in its share price on Tuesday, rising by 7% in early trading. This surge was driven by the continued positive outlook from international brokerage Morgan Stanley, which maintained its 'overweight' call on the company. The stock hit a record high of Rs 7,955, indicating a strong investor confidence in the company's future prospects.
The rally in Trent's stock can be attributed to several factors, including the launch of its new standalone store format, Zudio Beauty. This venture marks Trent's foray into the mass-priced beauty segment, putting it in direct competition with established players like Hindustan Unilever's Elle18, Sugar Cosmetics, Health & Glow, and Colorbar. The new launch further reinforced Morgan Stanley's conviction in the company, as it suggests a strategic expansion and diversification of Trent's business model.
Morgan Stanley has set a price target of Rs 8,032 per share for Trent, reflecting their optimism about the company's future performance. The brokerage highlighted that Trent's Beauty and Personal Care (BPC) sales contribution is already substantial in its Westside and Zudio stores. The BPC business within Zudio has achieved significant scale over time, benefiting from an increasing customer inclination towards indulgence and impulse purchases.
Citigroup, another global brokerage, initiated coverage on Trent with a 'buy' call in September. They assigned a price target of Rs 9,250 for the stock, placing it on their Pan-Asia high-conviction focus list. Citigroup praised Trent's successful transformation from a single-format to a multi-format player, leading to a remarkable 36 percent revenue Compound Annual Growth Rate (CAGR) from FY19 to FY24. As a multi-category player spanning fashion, lifestyle, grocery, and personal care, Trent achieved industry-leading revenue, EBITDA, and PAT CAGRs of 41 percent, 44 percent, and 56 percent, respectively, for FY24-27.
The strong performance of Trent's stock is further supported by its impressive financial results. In the June quarter, the company reported a remarkable 225% year-on-year surge in consolidated net profit, reaching Rs 391 crore, compared to Rs 167 crore in the previous year's corresponding quarter. Revenues also witnessed a significant increase of 56%, reaching Rs 4104 crore compared to Rs 2628 crore in the same quarter a year ago. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) soared by 199% year-on-year, reaching Rs 400 crore compared to Rs 266 crore in the previous year's quarter. These strong financial results underscore the company's robust growth and profitability, further bolstering investor confidence.
Trent's success can be attributed to its strategic approach, leveraging its supply chain expertise and insights gained from Westside and Zudio to revitalize its Star Bazaar business. This focus on leveraging existing strengths and strategically scaling up pilot projects such as MISBU, Samoh, and its joint venture with MAS positions Trent for continued growth and success in the competitive retail landscape.
Source: Multibagger Tata Group stock rises 7%, hits record high as Morgan Stanley maintains overweight call