Trent Ltd - Research Report

Private Client Research

Rating

Buy

Sector

Retailing

Company

Trent Ltd

Retailing


June 03, 2019

Sensex: 40267.62


CNX Nifty: 12088.55

NSE: TRENT


BSE: 500251

Reco Price
Rs. 396.00
Price Target (3 - 6 Months)
Rs. 495
Upside
25.00%

Date

June 03, 2019

Sensex

40267.62

CNX Nifty

12088.55

Exchange

Code

NSE

TRENT

BSE

500251

Stock Data

CMP (Rs)
412.00
Face value (Rs)
1
52 Week Range (Rs)
399.95 - 294.75
Market cap (Rs Crores)
13699.76
Price To Book Value (x)
8.08
P/E Ratio (x)
107.51
EV/EBIDTA (x)
51.56

One Year indexed Stock Performance

Trent Ltd Sensex
Trent Ltd
Return (%)
1m
6m
12m
36m
Absolute
7.22
25.40
27.91
144.90
Sensex
3.35
11.11
15.01
50.01

Shareholders

(in %)
31-Mar
Promoter
32.5
Public
67.5
Others
0
Total
100

+91 22 6639 3000

research@stockaxis.com

Profile

Trent Limited is engaged in the retail sale of readymade garments. The Company's segments include Retailing and Others. It primarily operates stores across three formats: Westside, Star and Landmark. Westside offers apparel, footwear and accessories for men, women and children, along with furnishings, decor and a range of home accessories. It offers products in approximately 60 cities across over 90 stores. Star hypermarket and convenience store chain offers a range of products, including staple foods, beverages, health and beauty products, apparel, home furnishings, vegetables, fruits, dairy and non-vegetarian products. The Star brand operates through approximately 30 stores under Star Daily, Star Market & Star Hyper banners. Landmark is a family entertainment format that offers a range of toys, front-list books and sports merchandize. Westside offers in-house fashion brands, such as Wunderlove, Sassy Soda, StudioWest, Zuba, Bombay Paisley, Denim Shop and Gourmet West, among others.

Strong numbers expected ahead.

Strong numbers expected in future: Westside reported a healthy 9% SSSG; store additions were robust at 27 stores in FY19. We expect the pace of growth to continue and expect double digit growth in upcoming years. Zudio has seen strong est. 2-3x growth in FY19; expect about 30% revenue CAGR over FY19-21E.

Trent reported strong revenue growth of 22% YoY to 2630.2 crore, which is driven by robust growth in the Westside Format, Trent’s 92% standalone revenues comes from Westside brand. Rapid scaling up of its latest value fashion apparel business, Zudio also assisted in incremental revenue growth.

Seeing recovery in JV’s, share in loss of associates/JV declined from 22.6 crore in FY18 to 11.7 crore in FY19 owing to improved performance in Zara and Star Bazar. We expect that in upcoming years ZARA and Star bazar come to breakeven.

Technical

Trent Ltd

Strong breakout, higher targets expetced

Price: Trent has given a fresh breakout from an important resistance range of around the 395-396 levels which was tested several times in the previous months of trading sessions. The stock is now comfortably moving above the 50- & 200-day moving average supported by good volumes which suggest us that there is very high probability of the stock heading higher towards new targets in the coming few days of trading session. Even when the broader markets corrected recently, Trent remained strong and has performed very well in the markets recently and we expect this outperformance to continue further.

Volume: Price and volume analysis plays an important part in determining overall strength or weakness in the stock. Price & volume pattern are moving in the same direction which reflects the true movement in the stock, Trent volume has been gradually increasing along with the price and after the breakout levels this confirms the overall strength and bullishness in the stock.

Relative Strength Index: RSI is a momentum indicator that shows whether stock is in overbought or oversold territory. It reflects the strength of the stock as compared to the past. Daily, weekly & Intraday RSI of Trent has been moving near the bullish zone this confirms that price and indicator are moving in the same direction and there is no divergence.

MACD: Moving Average Convergence Divergence is most effective momentum indicator of the trend. Crossover in MACD line with signal line shows buy signal in the stock. Daily, weekly and intraday MACD of Trent has been smoothly moving in the positive territory which indicates that the upside has just began.

Conclusion: Strong short-term uptrend in stock, increase in volumes along with the price, Long term and short-term moving averages sloping upward, sheer outperformance of the stock compared to its peers and overall broader markets suggests us that the stock may go higher towards new targets. Momentum Indicators like MACD and RSI are also indicating strength in the short to medium term trend, we recommend buying this stock at the current levels by keeping a stop below 364 for a target of 495.