Trent Stock Plummets 33% YTD, Analysts Remain Bullish Despite Slowdown
Trent Limited's stock has declined 33% year-to-date, making it the worst performer in the Nifty 50 index. Growth has slowed from 50% to 20% over the past four quarters due to densification, consumer slowdown, and high base effects. FII holdings have decreased from 24.40% in March to 18.40% in June. Despite this, 17 out of 26 analysts maintain a 'Buy' rating with a 27% average return potential. Trent's operational metrics remain strong, with revenue per square foot above ₹15,000 and improved ROCE. Zudio, Trent's apparel label, has become India's first $1 billion brand with a 2.50% market share.
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Trent Limited , a prominent player in the Indian retail sector, has experienced a significant downturn in its stock performance this year, emerging as the worst performer in the Nifty 50 index. The company's shares have declined by 33.00% year-to-date and a staggering 43.00% since its inclusion in the benchmark index.
Slowing Growth and Valuation Concerns
The once high-flying stock, which had been enjoying growth rates of up to 50.00%, has seen its growth trajectory slow to 20.00% over the past four quarters. This deceleration is attributed to several factors:
- Densification leading to cannibalization
- Consumer slowdown
- High base effects
Despite the sharp decline, Trent's valuation remains elevated. The stock currently trades at a price-to-earnings (PE) ratio of 83x, down from 101x at the beginning of the year but still considered high by many market observers.
Shifting Investor Sentiment
The slowdown has not gone unnoticed by foreign institutional investors (FIIs). FII holdings in Trent have decreased significantly:
| Date | FII Holdings |
|---|---|
| March 2023 | 24.40% |
| June | 18.40% |
This reduction in FII holdings indicates a shift in investor sentiment towards the stock.
Analyst Optimism Persists
Despite the recent underperformance, analysts remain largely optimistic about Trent's prospects:
- 17 out of 26 analysts maintain a 'Buy' rating on the stock
- Average return potential: 27.00%
Analysts cite expectations of:
- 20-25% sales CAGR (Compound Annual Growth Rate)
- Margin expansion
Operational Highlights
Trent continues to demonstrate strong operational metrics:
- Revenue per square foot: Above ₹15,000
- Operating cash flows:
- FY23: ₹455 crore
- Current fiscal year: Over ₹1,120 crore
- Return on Capital Employed (ROCE):
- 2022: 9.00%
- Current: 31.00%
Zudio's Success Story
A bright spot in Trent's portfolio is Zudio, which has achieved a significant milestone:
- Became India's first $1 billion apparel label
- Current market share: 2.50%
- Room for expansion compared to international peers
Conclusion
While Trent's stock has faced significant headwinds, the company's operational performance and analyst optimism suggest potential for recovery. Investors and market watchers will be closely monitoring Trent's ability to navigate the current challenges and capitalize on its strong brand presence in the Indian retail market.
Historical Stock Returns for Trent
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.76% | -0.81% | +1.43% | -8.27% | -34.58% | +619.35% |
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