Despite the challenging environment, Trent reported steady operational Q2FY21 numbers. With gradual opening of stores, it is seeing a rise in offtake on a MoM basis. Standalone revenues (including Westside, Zudio and Landmark formats) de-grew 44.7% YoY to Rs. 452.1 crore in Q2FY21 (I-direct estimate: 47.0% de-growth, Q1FY21: Rs. 96.3 crore). Owing to higher discounting and enhanced share of Zudio, gross margins fell sharply by 695 bps YoY to 40.9%. However, it has significantly curtailed operating overheads, with employee & other expenses down 31% each to Rs. 57.4 crore and Rs. 121.3 crore, respectively. Hence, EBITDA was at Rs. 6.4 crore (Q1FY21: Rs. 119 crore loss; with margin of 1.4%). Other income came in at Rs. 36.4 crore of which Rs. 22.4 crore pertains to lease rent waiver. Reported PBT losses narrowed down sequentially to Rs. 73.3 crore (Q1FY21: Rs. 182.2 crore). Owing to deferred tax asset (Rs. 25.2 crore), the company reported net loss of Rs. 48.1 crore (Q1FY21: Rs. 139.5 crore loss). Given the inherent strength of the brands, recovery rate has improved significantly from mere 38% in July to 70% in October. Further, the management indicated that consumer sentiments have improved in the recent weeks running up to Diwali.
Valuation & Outlook
Trent has over the years consistently outperformed peers given the strong brand patronage (Westside, Zudio, Star, Zara) and proven business model (Westside: 99% private label). Given the encouraging trends in footfall traction, we anticipate revenue trajectory to further accelerate in H2FY21, coupled with better profitability. Also, healthy b/s (net cash positive) will enable it to tide over the current situation better than peers. We reiterate BUY with revised TP of Rs. 785 based on SOTP valuation (previous TP: Rs. 680).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Trent_Q2FY21.pdf
Shares of TRENT LTD. was last trading in BSE at Rs.670.1 as compared to the previous close of Rs. 678.05. The total number of shares traded during the day was 14677 in over 1010 trades.
The stock hit an intraday high of Rs. 679.45 and intraday low of 650.2. The net turnover during the day was Rs. 9880104.