3 weeks ago
Brokerages divided on Trent as margins beat, Jefferies stays cautious
Trent is a company that runs clothing stores like Westside and Zudio.
Recently, Trent told people how much money it made in three months.
The company did better than most people expected.
Some smart money experts, called brokerages, study companies.
They help people decide if a company's shares are worth buying.
Most of these experts were happy with Trent.
They raised the price they think Trent's shares will reach.
One expert group, called Jefferies, was not so sure.
It wants to wait and see if people keep buying enough clothes.
UBS, Macquarie, Bernstein and HSBC raised their price targets on Trent after better-than-expected margins in its June-quarter results.
Jefferies retained a 'Hold' rating, citing concerns over demand visibility and input cost inflation, and trimmed FY27-FY29 earnings estimates.
UBS set the highest target at Rs 3,800, saying EBITDA came in 19% ahead of its estimates on a 149-basis-point gross margin expansion.
Trent added one net Westside store and 19 net Zudio stores during the quarter.
Most brokerages said sales growth momentum, not just margins, will determine the stock's next leg of performance.
- Who
- Trent, the Tata Group retailer, and brokerages UBS, Macquarie, Bernstein, HSBC and Jefferies.
- What
- Brokerages responded to Trent's stronger-than-expected June-quarter margins, with most raising price targets while Jefferies stayed cautious.
- Where
- Not explicitly stated in the article; prices are quoted in rupees, indicating an Indian market.
- When
- Following Trent's June-quarter results, with the current share price quoted as of August 7.
- Why
- Because Trent reported better-than-expected margins, but brokerages differ on whether revenue growth can sustain the stock's performance.
Bullish brokerages (UBS, Macquarie, Bernstein, HSBC)
Cautious brokerage (Jefferies)
Demand outlook
Bullish brokerages (UBS, Macquarie, Bernstein, HSBC)
Constructive management commentary on demand and long-term growth prospects support higher price targets.
Cautious brokerage (Jefferies)
Management commentary on near-term demand seemed guarded due to geopolitical uncertainties; demand visibility is a concern.
Margins vs revenue growth
Bullish brokerages (UBS, Macquarie, Bernstein, HSBC)
Margin expansion (gross margins up about 149 basis points) and improving operating leverage justify raising targets.
Cautious brokerage (Jefferies)
Stronger profitability alone may not be enough; sustained acceleration in revenue growth is critical for the stock's next leg of performance.
Cost and inflation pressures
Bullish brokerages (UBS, Macquarie, Bernstein, HSBC)
Some commodity inflation is unlikely to impair Trent's FY27 earnings growth trajectory.
Cautious brokerage (Jefferies)
Input cost inflation and calibrated consumer spending prompted Jefferies to trim FY27-FY29 earnings estimates.
Key facts
- Current share price
- Rs 3,032.20
- UBS rating/target
- Buy; Rs 3,800 (25.3% upside)
- Macquarie rating/target
- Outperform; Rs 3,600 (18.7% upside)
- Bernstein rating/target
- Outperform; Rs 3,500 (15.4% upside)
- Jefferies rating/target
- Hold; Rs 3,435 (13.3% upside)
- HSBC rating/target
- Buy; Rs 3,390 (11.8% upside)
- Store additions in quarter
- 1 net Westside store; 19 net Zudio stores
- 1-month share return
- +3.57%
Quotes
Bernstein Analyst
Analyst from Bernstein Securities
“The peak phase of revenue growth for the company appears to be over, but even sustaining 18-20% growth would still make Trent a top‑quartile consumer discretionary company in terms of growth.”
financialexpress.com
“We remain bullish on Trent as a long term compounding play and we think some commodity inflation is unlikely to impair the earnings growth trajectory in FY27.”
financialexpress.com
Sources
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