Broker’s call: Trent (Buy)

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Target: INR 1,721

CMP: INR 1,366.85

Trent’s standalone sales (Westside and Zudio) grew 75 per cent year-on-year and 33 per cent CAGR during the fourth quarter of fiscal 2019 to Rs.2,080 crore. As we indicated in our preview, the impact of inflation on Trent’s consumer audience is expected to be lower.

Westside’s LFL growth was 23 percent compared to the fourth quarter of fiscal ’22. Stand-alone gross margins were 40.8 percent, down 830 basis points year-over-year. The decline can be attributed to Zudio’s higher prominence in total sales and the impact of inflation.

As a result of lower GP, operating pre-load and normalized lease costs, stand-alone EBITDA margins decreased 260 basis points to 10%. The total store count for Westside and Zudio combined was 566 from 537 in the prior quarter. Star reported sales growth of 46 per cent and a positive contribution to PAT (Rs. 6.7 crore) by JV and Associates (Star, Zara and Massimo Dutti) for the fourth consecutive quarter remains a major positive factor for the future.

We’re revising EPS estimates up 4 percent each for fiscal year 24/25, respectively. We continue to rate Standalone (Westside and Zudio) and Zara at 33x EV/EBITDA and Star at 1.5x sales from FY25E EPS estimates to reach TP of $1,721 and maintain our Buy rating on the stock.