2 hours ago
Shares of Trent Ltd. will be in focus on Thursday, April 23, after brokerage firms reacted to the Tata group company's fourth quarter (Q4FY26) numbers. Trent reported a strong operational performance, with margins and profitability beating Street estimates.
Revenue came in at ₹5,028 crore, slightly below estimates of ₹5,060 crore. However, profitability was stronger than expected, with EBITDA at ₹927 crore against a poll estimate of ₹848 crore. EBITDA margins expanded to 18.4% versus expectations of 16.8%.
Net profit stood at ₹413 crore, ahead of estimates of ₹375 crore. On a year-on-year basis, revenue grew 19.2%, EBITDA rose 42%, and PAT increased 32.5%.
Margin expansion remained robust, with gross margins improving by 215 bps to 43.8% and EBITDA margins rising by 295 bps to 18.4%. Depreciation surged 73% to ₹376.5 crore.
Trent's like-for-like growth in the fashion portfolio remained in the low single digits for both the quarter and the full year. Newer categories such as beauty and personal care, innerwear, and footwear contributed over 21% of revenues, while own brands accounted for more than 73% of Star's revenues. Online sales grew 25% and contributed over 6% to Westside revenues.
Consumer sentiment may improve
Management remains optimistic on demand recovery, indicating that consumer sentiment is likely to improve in the coming months.
The firm plans to expand its presence across existing and new micro-markets, while accelerating store additions under the Star format, where expansion has lagged. Trent also pointed to emerging inflationary pressures in select raw materials.
Trent bonus, rights issue
The company also announced a bonus issue in the ratio of 1:2 and received board approval to raise up to ₹2,500 crore via a rights issue.
The proposed fundraise will be utilised for store upgrades, new category incubation, supply chain and warehouse expansion, digital investments, and faster rollout of Star stores, including selective investments in retail real estate.
How brokerages reacted to Trent Q4
Citi has maintained a 'Sell' rating on the stock, while raising its price target to ₹4,100. The brokerage believes Trent's gross margins may have been supported by a reversal of inventory provisioning.
Bernstein has an 'Outperform' rating on the stock with a price target of ₹5,000, stating that Trent is "back on track" with both growth and margin expansion. However, it said the proposed rights issue does not excite it.
Bernstein said that the quarter marked a return to a 20% growth trajectory alongside margin expansion, and expects the company to sustain this growth with a stable 11% operating EBIT margin over the medium term.
In the near term, it flagged macro headwinds such as input cost inflation, supply disruptions, and demand uncertainty, along with the need for more clarity on the rights issue and its utilisation.
HSBC has a 'Buy' rating on Trent with a target price of ₹4,830. While the brokerage is awaiting more details on the fundraise, it sees the expansion of the Star business as a key monitorable.
The brokerage said that a sharper-than-expected decline in store productivity, particularly due to rising competition, remains a key downside risk that could lead to further valuation compression.
Jefferies has a 'Hold' rating with a price target of ₹4,675. It said that strong Q4 growth was driven by store expansion, especially in Zudio, along with improving like-for-like growth.
Jefferies added that operating leverage and internal efficiency measures led to nearly 40% YoY growth in operating EBITDA, well ahead of estimates.
However, management commentary remained cautious on near-term demand amid geopolitical uncertainties, which could also lead to cost pressures.
The brokerage added that Trent continues to focus on deepening its presence in key markets while expanding into smaller cities.
Nuvama Institutional Equities has maintained a 'Hold' rating on Trent, raising its price target to ₹4,828 from ₹4,543 earlier. The brokerage firm cited a nascent earnings upgrade cycle that could support further multiple expansion.
The stock has rallied over 32% in the past month but remains down 47% from its all-time high of ₹8,234. It currently trades at 72x FY27E and 60x FY28E earnings.
Shares closed 0.44% higher on Wednesday at ₹4,409.90 and are up around 3% so far this year.
