Stock Of The Day: Trent's Q4 Revenue, Profit Rise — Key Levels, Analyst View
All you need to know about Trent's fourth-quarter earnings including views of top brokerages.
Tata retailer Trent Ltd.'s revenue and net profit rose in the fourth quarter of fiscal 2024. Revenue jumped 53.4% year-on-year to Rs 3,187 crore during the January-March period. This compares to Rs 2,077 crore in the same period last year.
Net profit of the Tata Group company rose to Rs 712 crore from Rs 45 crore in the previous year, aided by a one-time lease readjustment gain of Rs 543 crore, with a tax thereon of Rs 138 crore.
Gross margin surprise was offset by employee costs, which saw a sharp 90% increase YoY.
Trent's fashion concepts saw like-for-like growth of over 10% compared to the year-ago quarter.
The company's shares rose 8.5% before paring gains to trade 4.7% higher as of 10:25 a.m., compared to a 0.37% rise in the Nifty 50. The stock has jumped 221.26% in the past year.
Trent Q4 FY24 Results Highlight (Consolidated, YoY)
Revenue at Rs 3,298 crore vs Rs 2,183 crore.
Ebitda at Rs 469.64 crore vs Rs 203.02 crore.
Margin at 14.2% vs 9.3%.
Net profit at Rs 712 crore vs Rs 45 crore.
Exceptional gains worth Rs 576 crore.
Board recommends dividend of Rs 3.2 per share.
Key Levels
Resistance level: Rs 4,670 apiece (life high).
Support levels: Rs 3,843 apiece (one-month low).
Cost Breakdown
Trent Ltd. saw labour costs rise by 1.8% and occupancy costs jump by 1.1%. However, there was a 3.1% decrease in other expenses.
Rent spiked 74% YoY, primarily due to the growing number of Zudio stores.
Depreciation expenses surged 29% sequentially, deviating from the average 7% increase over the preceding three quarters.
Balance Sheet Decoded
In FY24, Trent Ltd.'s working capital days were down by six days, primarily driven by a decrease in inventory days to 47 days of sales. This improvement was partially offset by a decrease in payable days to 23 days of sales.
The company's consolidated right-of-use assets also fell by 66%, and lease liabilities decreased by 77%. During the fourth quarter, Trent accounted for a gain of Rs 4,860 crore (net of tax) related to the reassessment of right-of-use assets and lease liabilities, stemming from a periodic review of the store portfolio and consolidation of stores.
As of March 2024, the company's net debt stood at Rs 200 crore, compared to Rs 400 crore in FY23.
Cash Flow
Dividend income from subsidiaries, JVs, and associates—with the largest contribution typically coming from the Zara JV with Inditex—amounted to Rs 73.6 crore, marking a 50% fall compared to FY23.
Capital expenditures for the year amounted to Rs 740 crore, up from Rs 500 crore in FY23.
Brokerage View
Nuvama
Maintains 'buy' with a target price of Rs 4,926 per share, a 14% upside.
The performance was stellar, with a standalone Ebitda beat of 6% (17% to consensus).
Revenue growth momentum was sustained at 50%-plus YoY.
Star’s performance remains robust.
Factors in higher gross margins drive 5% PAT upgrade.
The brokerage stated that they are awaiting clarification on lease liability adjustments, which might have something to do with franchising.
Jefferies
Rates 'hold' with a target price of Rs 4,150, implying a downside of 4%.
Strong performance, quite like Tata, but disclosures are quite unlike.
Trent will likely become more mainstream than in the past.
Sees merit in following best practices from group firms like Tata Consumer Products and Titan.
The gross margin surprise was offset by a 90% increase in employee costs.
Morgan Stanley
Has an 'equal' weight with a target price of Rs 3,675 per share, which is a downside of 15%.
Q4 beat on the top line and margins.
Beat was led by better-than-expected fashion top line and margins.
Uncharted execution on growth and profitability in FY24 increases conviction in growth sustainability.
Company had higher proceeds from the sale of assets of Rs 3.4 billion in FY24 versus an average Rs 1.2 billion during the past three years.
