Target: ₹1,430

CMP: ₹1,265.60

Our channel checks threw up positive feedback on store economics, store additions, and a revenue recovery in both Westside and Zudio, despite the impact of the Covid-19 pandemic.

Both formats have a high fashion quotient. This, along with Zudio’s sharp pricing, has allowed it to taste success across multiple cities, even as other retailers have been impacted by the pandemic.

We have revised our FY24 revenue/EBITDA up by 5.8 per cent/6.5 per cent and are now building in 37 per cent/57 per cent revenue/EBITDA CAGR over FY22-24E on the back of a recovery from the Covid-19 pandemic, 33.5 per cent footprint growth, and 9 per cent SSSG on a stable state basis.

Trent’s successful store performance, healthy store economics, and aggressive growth offer a huge runway for growth over the next three-to-five years. We expect 37 per cent revenue growth over FY22-25, 4 per cent above our Retail coverage universe, which warrants a premium valuation.

The key downside risk to our thesis is a potential GST rate hike on apparels to 12 per cent from 5 per cent, which can adversely impact demand, especially in the price sensitive Value Retail segment. Increasing raw material prices can compel apparel retailers to undertake another round of price hikes, which can adversely impact sales volumes.