This Tata Group stock beat Sensex for a decade, surged 1,154% in 4 yrs

Trent shares hit a new high of Rs 7,939.90, following a 4% rally on the NSE after Citi initiated coverage on the stock with a 'Buy' rating and a target price of Rs 9,250.

Shares of Tata Group-owned retail company Trent reached a record high of Rs 7,939.90 after rallying 4 per cent on the National Stock Exchange (NSE) in Thursday’s intraday trade.

The rally in the stock came after global brokerage firm Citi initiated coverage on Trent with a 'buy' rating and a target price of Rs 9,250 on a robust growth outlook.

The NSE last month announced that Trent and state-owned Bharat Electronics (BEL) will replace Divi’s Laboratories and LTI Mindtree in the Nifty 50 index rejig. The changes, part of the semi-annual review, will become effective from September 30, the NSE said.

So far, in the calendar year 2024 (CY24), the stock price of Trent has zoomed 160 per cent as compared to the 18 per cent rally in the BSE Sensex during the same period. It has outperformed the market in the past 10 consecutive years. 

In the previous calendar year (CY23), the stock surged 126 per cent against the 19 per cent gain in the benchmark BSE Sensex.

Since the stock split from Rs 10 to Rs 1 on September 12, 2016, the market price of Trent has skyrocketed by 3,285 per cent from Rs 234.53. In the last four years, it has zoomed 1,154 per cent from Rs 633 on the BSE.

Trent’s transformation from a single-format (Westside) to a multi-format (Westside, Zudio, Star, Samoh, Utsa, Misbu) and multi-category (fashion and lifestyle, grocery, beauty personal care and fashion accessories) player has led to a higher revenue compound annual growth rate (CAGR) at 36 per cent between FY19 and FY24 compared to India’s leading consumer discretionary and retail peers, Citi said in its coverage report.

The brokerage firm has modeled for Trent's industry-leading rev/Ebitda/PAT CAGRs of 41/44/56 per cent in FY24-27E.

Leveraging on its supply chain, as well as learnings from Westside and Zudio, Trent is turning around Star and can meaningfully scale up other pilot projects, such as Misbu, Samoh and MAS joint venture. “In addition to ranking it a top pick in our India consumer discretionary and retail coverage, we include Trent in our Pan-Asia high-conviction Focus List,” analysts at Citi stated in their report.

Trent is a part of the Tata Group and operates a portfolio of retail concept stores. The company's primary customer propositions include Westside, Zudio, and Trent Hypermarket, which operates in the competitive food, grocery, and daily needs segment under the Star banner. 

Trent operates 228 Westside stores and 559 Zudio stores across 178 cities. The company achieved robust revenue growth in Q1FY25 as the top line increased by 57 per cent Y-o-Y to Rs 3,992 crore. This growth was driven by increased footfalls and strong performance across brands, concepts, categories, and channels, despite subdued market sentiments and heightened competitive intensity.

Analysts at Axis Securities expect strong sales growth to continue in the coming quarters, driven by Trent's focus on rapid store expansion and ongoing assortment renewal, which should result in increased overall footfall.

Additionally, the improvement in the earnings profile across all formats, the reduction in losses at Star Bazaar, and the enhanced traction at the Inditex JV are positive indicators for the company.

In recent years, Trent has adopted a small-format store model for Star Food. This approach, coupled with sharp pricing and a focus on fresh produce and private labels, has yielded positive results, the brokerage firm said in Q1FY25 result update.

Meanwhile, Trent in its FY24 annual report, said the Indian retail industry is continuing its turnaround momentum with every segment of retail recording strong growth rates. It is projected to expand to $4.5 trillion by the end of the decade, driven by socio-demographic and economic factors such as urbanisation, income growth, a rise in nuclear families, and a shift from the unorganised to the organised segment.

India’s apparel market is pegged at Rs 6.5 trillion in 2024, with nearly 40 per cent of this represented by organised players.

In recent years, private brands have increasingly emerged as the rising stars in the retail and e-commerce segment, the company said.