Trent shares rally 6% after posting a 5-fold jump in Q4 profit. Should you buy them?

The five times jump in profits was largely due to the exceptional items income of Rs 543.35 crore in the quarter which was not there in the corresponding quarter of last year.

The earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q4FY24 rose 126% YoY to Rs 477 crore as compared to Rs 211 in Q4FY23. Meanwhile, the margin for Q4FY24 rose to 15% as compared to 10.2% in Q4FY23.

Here’s what brokerages say:

Jefferies

The company delivered a strong performance, quite like Tata, but disclosures are quite unlike. Confidence seems high, which is reflected in the proposed (cash) 3Y incentive scheme for eligible staff. Weak disclosures, however, leave a lot to imagination. With >US$18bn m/cap, Trent will likely become more mainstream than in the past. The global investment bank sees merit in following best practices from group firms like Titan and Tata Consumer.

Jefferies advises to ‘hold’ Trent but has raised the target price to Rs 4,150 from Rs 3,500 earlier.

Nuvama

Trent reported another stellar performance with standalone EBITDA beat of 6% with the key driver being gross margin improvement (up 450bp YoY) on the back of moderating raw material prices. Revenue growth momentum sustained at 50%-plus YoY and Zudio’s FY24 addition of 193 stores (545 total) matched the herculean 200 target set last year. Star’s performance remains robust.

Factoring in higher gross margins drives a 5% PAT upgrade and rolling over yields a revised price target of Rs 4,926 from an earlier Rs 4,304 while maintaining a ‘buy’ view on the stock.

Motilal Oswal

Considering strong revenue growth, aggressive store additions, margin tailwinds from moderating RM costs, and operating leverage, we estimate a CAGR of 32%/38% in revenue/PAT over FY24-26. The continued momentum in Star and improving store metrics offer further upside potential.

Given Trent’s strong growth opportunity going forward, Motilal reiterated a ‘buy’ rating on the stock with a target of Rs 4,870.

Kotak Institutional Equities

Trent reported a strong performance in 4QFY24, belying the slowdown in consumption spends. Standalone revenue growth came in at 53% YoY. Store expansion of Zudio (a whopping 193 stores added in FY2024) and 10%+ SSSG in fashion concepts drove revenue growth. The downward adjustment in the quantum of lease liability drove a lower interest charge and resulted in a 47% net profit beat. We raise FY25-26 EPS by 13-19% on account of the expectation of sustained RM price benefits and operating leverage.

KIE revised the target price for Trent to Rs 4,600 from Rs 3,800 earlier while maintaining an ‘add’ rating for the stock.

Philip Capital

Trent continues to be our top pick as it consistently delivers industry-leading performance in the apparel segment. It continues to command premium valuation on account of revenue/EBITDA CAGR of 36%/35% over FY24-26, high option-value from new businesses (like Samoh and Misbu), and turnaround in Star grocery business coupled with healthy cash generation, solid balance sheet and higher return ratios.

The brokerage maintained its ‘buy’ rating on the stock with a target price of Rs 4,771.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)