Trent rallies 9% on strong September quarter results

The company said the recovery in revenue coupled with various cost mitigation measures, including with respect to property related pay-outs led to improved operating profitability

Shares of Trent rallied 9 per cent to Rs 1,133 on the BSE in Wednesday’s intra-day trade after the company reported a strong set of September quarter (Q2FY22) earnings, with standalone profit after tax (PAT) of Rs 126 crore on back of healthy revenue. The Tata Group company had posted loss of Rs 48 crore in a year ago quarter (Q1FY22).

In Q2FY22, the company’s standalone revenues more-than-doubled or up 126 per cent to Rs 1,020 crore from Rs 452 crore in the corresponding quarter of previous fiscal. Furthermore, tight leash on operating overheads translated into the company reporting strong earnings before interest, tax, depreciation and amortization (ebitda) margins of 21.7 per cent from 1.4 per cent in Q2FY21.

Trent said the recovery in revenue coupled with various cost mitigation measures, including with respect to property related pay-outs led to improved operating profitability. The company witnessed a rapid recovery in customer offtake, starting from the middle of June 2021, as businesses reopened in many markets.

Trent has over the years consistently outperformed peers given the strong brand patronage (Westside, Zudio, Star, Zara) and proven business model (Westside: 100 per cent private label). The robust recovery depicts the inherent strength of the business model, ICICI Securities said in a note. “We expect revenue trajectory to further accelerate in H2FY22 on the back of encouraging footfall trends and healthy square feet addition. On account of healthy beat on estimates, we revise our revenue and earnings estimates upwards for FY22/23E. We continue to remain positive on the stock,” the brokerage firm said.

According to Motilal Oswal Securities, Trent’s superior liquidity profile at a time when many small/unorganized retailers are in stress and aggressive store additions should allow it to grow at a healthy pace as the market recovers. Zudio, with its strong value format proposition, has recovered faster, given the downtrading in the market, and is witnessing a strong growth in store footprint. “Trent’s industry leading growth, backed by superior execution, and a healthy Balance Sheet warrants a premium valuation, but it is already trading at rich valuations, leaving limited upside for the stock. Thus, we remain Neutral on the stock,” the brokerage firm said.

At 09:25 am; the stock was trading 7 per cent higher at Rs 1,110, as compared to 0.34 per cent rise in the S&P BSE Sensex. It had hit a 52-week high of Rs 1,208.30 touched on October 13, 2021.