Trent Ltd. is a part of the Tata Group of companies and has been an early entrant in India’s organized Retail sector. Domestic brokerage and research firm Axis Securities has recommended Trent as its top stock pick of the week as it expects the company’s recovery momentum to continue in H2FY22.
Trent’s fashion business reported a remarkable recovery in H1FY22 and the momentum is expected to continue in H2FY22 as well aided by a strong festive and wedding season led buying, as per the brokerage. This will lead the company to come back to profitability plane after having witnessed an adverse impact of the pandemic on its business.
Axis Securities has recommended Buy rating on the Tata Group stock with a target price of ₹1,180 per share. Though the ideal investment horizon for such ideas remain 6-9 months, the brokerage said its picks may provide some profit-making opportunities even to short-term investors.
Trent’s management has indicated a significant scale-up in the Zudio format which is a value fashion play targeting youth between 15-25 years. Zudio offers trendy products with sharp price points across entire product offerings. This is a highly profitable format with high revenue per sq. ft. With backend processes and infrastructure aligned with Westside at store level Zudio has already become profitable, Axis highlighted.
“Management continues to focus on reduction in rental and other related charges and expenses by engaging with property partners. Further, it is looking to variabalize certain expenditure with that to revenues including lease payments thus mitigating the downside pressure on margins. Cost saving initiatives and increasing scale of operations, Trent could report significant improvement in margins in Q3FY22 and Q4FY22,” the brokerage note stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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