Trent Ltd - Q1FY21 First Cut (Standalone) - ICICI Securities

(CMP: Rs. 575, MCap: Rs. 20447 crore)

Trent reported a nearly washout quarter following closure of stores from mid-march onwards. Trent has a strong presence in the state of Maharashtra (~ 17% and 16% of Westside and Zudio stores) which was one of the worst impacted states. Food & Grocery stores (Star bazar, 50% JV) continued to operate in the quarter. Company made additional provisioning with respect to inventories in the current quarter, however considering encouraging traction post lockdown relaxations, the company is re-evaluating the requirements of this provisioning in the coming period. Overall 90% of the Westside and Zudio stores have now reopened.

Q1FY21 Earnings Summary

- Standalone revenues (which includes Westside, Zudio and Landmark formats) de-grew by 87.4% YoY to Rs. 96.3 crore in Q1FY21 on the back of the Covid 19 related store closures for a major part of the quarter. On the store addition front, company added 6 new stores in the quarter (4 Zudio, 1 Westside, 1 landmark)

- Company has made provisions worth Rs. 40 crore towards inventories which led to gross margins contracting substantially to 13.3% vs. 53% in Q1FY20. Considering encouraging traction post lockdown relaxations, company is re-evaluating the requirements of this provisioning in the coming period. Owing to cost rationalisation measures, other expenses and employee expenses de-grew by 40% and 18%, respectively. EBITDA losses came in at Rs. 119.1 crore

- Other income grew by 50% YoY to Rs. 52.9 crore of which Rs. 36 crore pertains to rent related adjustments. Reported PBT loss came in at Rs. 182.2 crore. Owing to deferred tax asset (Rs. 43 crore), company reported net loss of Rs. 139.5 crore

Company has witnessed encouraging response for its EOSS which started from 1st August. Footfalls are currently at ~35% of pre-Covid levels, however owing to better conversion ratio, sales are currently at 55% of pre-Covid levels. Management expects normalcy to return gradually over the next 12 months. E-commerce sales witnessed 50% growth over previous period post lockdown relaxations. Apart from strengthening its digital presence, the company will continue its accelerated store expansion strategy in FY21E.

We will be coming out with a detailed report.

Shares of TRENT LTD. was last trading in BSE at Rs.567 as compared to the previous close of Rs. 575.2. The total number of shares traded during the day was 41301 in over 2777 trades.

The stock hit an intraday high of Rs. 587.9 and intraday low of 548.55. The net turnover during the day was Rs. 23676848.

Source : Equity Bulls

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