Trent Stock: 45% Correction Boosts Valuation, Zudio Drives Growth

Trent Limited’s stock has experienced a significant 45% correction from its peak of Rs 5,500 in late 2024, yet its growth trajectory remains strong. This decline has, however, made the stock’s valuation more appealing to investors.

Despite a slowdown in year-over-year (YoY) revenue growth, the company has successfully expanded its margins, highlighting underlying operational strength. The market is now reassessing Trent’s long-term potential given these shifts.

Key Numbers: Trent’s Performance

• Stock correction from peak: 45%
• Peak price: Rs 5,500 in late 2024
• Operating EBITDA growth YoY: 33%
• Revenue growth YoY: 18%

Three primary factors are underpinning Trent’s continued growth potential, particularly the aggressive expansion of its Zudio brand. This rapid network build-out creates a substantial competitive barrier.

Zudio’s store count reached 982 in the most recent quarter, marking a 216 store increase YoY. Projections suggest Zudio’s footprint could expand to approximately 2,000 stores by 2030, potentially surpassing global fast-fashion leader Zara’s store count.

Financial Strength and Margin Growth

• Operating EBITDA surged: 33% YoY
• Profit After Tax (PAT) quintupled: from Rs 103 crore in Q1 FY23 to Rs 532 crore in the latest quarter
• PAT margin expansion: from 6.2% to 9.24%

Trent’s operating EBITDA growth of 33% YoY significantly outpaced its 18% YoY revenue growth, indicating strong pricing power beyond mere volume. Further margin improvements are anticipated due to increased store density and an optimized supply chain.

The stock’s PE multiple has adjusted from nearly 150 at its peak to 87.50 currently. Factoring in a potential PAT growth of 25-30% for FY27, the forward PE multiple is estimated to be below 70, positioning the stock at a more reasonable valuation.

Competitor Analysis: Trent vs. ABFRL

• ABFRL revenue growth: 10.65% YoY
• ABFRL EBITDA decline: 2%
• ABFRL PAT margin: -12.2%
• Trent Return on Capital Employed (ROCE): 28.34%
• Trent Return on Equity (ROE): 27.74%

In contrast, competitor Aditya Birla Fashion and Retail Limited (ABFRL) reported slower revenue growth at 10.65% YoY and a 2% decline in EBITDA. ABFRL also recorded a negative PAT margin of -12.2% and a reduction in its Pantaloons segment store count, further highlighting Trent’s stronger financial health and operational efficiency.

Despite the recent stock market correction, Trent Limited is presented as an attractive investment opportunity within the retail sector, driven by robust store expansion, impressive margin growth, and a more favorable valuation.