Value stock picks for June: The shares of the Tata Group company that can jump 30%
Why Buy Trent Stock?
According to Motilal Oswal, Trent’s aggressive footprint expansion and strong Like-To-Like (LTL) growth of 16% YoY resulted in strong revenue growth of 53% YoY in 4QFY22. “Westside/Zudio added 26/100 stores respectively in FY22. Overall, Westside/Zudio added 30%/51% more stores in the past year/two years, respectively. The economy at the Westside and Zudio store level remains healthy, as evidenced by strong comparable growth and Westside’s annualized revenue run rate that was nearly double its FY22 level (>$50 billion). ‘INR).Emerging categories such as beauty and personal care, loungewear and home also continued to gain traction with customers,” the company said.
According to Motilal Oswal, Trent’s performance remains well ahead of its peers and offers a huge avenue for growth over the next 2-3 years. “We estimate CAGR Revenue/EBITDA at 45%/58% in FY22-24E, driven by strong revenue recovery and aggressive store additions for Zudio and Westside,” the brokerage said.
Industry leading performance
Earlier in its April business report, Motilal Oswal noted that Trent’s peak performance was driven by: a) strong SSSG and productivity, b) continued aggressive store additions and c) Zudio’s solid value format proposition. Trent’s performance remains well ahead of its peers and offers a huge avenue for growth over the next 3-5 years.
“We maintained our revenue/EBITDA estimates for FY23-24 taking into account a revenue/EBITDA CAGR of 45%/58% from FY22-24E, driven by a strong recovery in revenue above pre-COVID levels and the addition of 100/35 stores for Zudio and Westside, respectively, over the same period. of the same period,” the brokerage said.
Estimates and view
Motilal Oswal attributed 31x EV/EBITDA to the standalone business (Westside and Zudio; 15% premium over the last five years up to pre-Covid and 10% premium on our retail coverage universe given its exceptional growth), 1x EV/Sales to Star Bazaar and 15x EV/EBITDA to Zara on FY24E, thus reaching its target price of Rs 1,430, with a call to buy on the action.