Trent Ltd Shares Surge on Morgan Stanley’s Endorsement and New Launches

On Tuesday, shares of Trent Ltd, a subsidiary of the Tata Group, experienced a 7% increase in early trading following an ‘overweight’ rating retained by the international brokerage firm Morgan Stanley. The company’s shares soared to a record high of Rs 7,955, with its market cap reaching Rs 2.80 lakh crore on the Bombay Stock Exchange (BSE). Trent’s stock has displayed minimal volatility over the past year, evidenced by a beta of 0.8. During the trading session, approximately 0.24 lakh Trent shares were traded, culminating in a turnover of Rs 18.40 crore.

The stock surge is concurrent with Trent’s expansion into the beauty retail sector through its newly launched standalone store format, Zudio Beauty. This venture positions the company in direct competition with existing players like Hindustan Unilever‘s Elle18, Sugar Cosmetics, Health & Glow, and Colorbar.

Additionally, Trent introduced its new lab-grown jewelry brand ‘Pome‘ in select Westside stores located in Mumbai, Bengaluru, Hyderabad, and Gurgaon. According to domestic brokerage firm Kotak Equities, Pome is being branded as the ‘Zudio of the jewelry segment,’ offering competitively priced lab-grown diamond jewelry aiming to democratize access to diamonds.

Kotak Equities has analyzed Pome’s pricing strategy, indicating potential discounts of 30% compared to mid-range natural diamond jewelry and massive reductions of up to 85% against high-value diamond pieces. Estimated gross margins for Pome’s retail operations, akin to those of Caratlane, are projected at around 45-50%.

Morgan Stanley has set a share price target of Rs 8,032 for Trent, citing significant contributions from beauty and personal care (BPC) sales in Westside and Zudio stores. Meanwhile, Citi Global Markets has also expressed favorable outlook on Trent, initiating coverage with a ‘buy’ recommendation and a Rs 9,250 price target, incorporating the stock into its Pan-Asia high-conviction focus list.

Trent Ltd, over the span of two years, has seen a notable stock price increase of 444%, with a 281% rise in the past year alone. Over three years, the stock has delivered an impressive return of 615%. The company, an integral part of the Tata Group, exhibits a diverse portfolio across fashion, lifestyle, grocery, and personal care sectors.

Market experts have credited Trent’s successful transformation from a single-format to a multi-format retail player as a major factor in its financial growth. Between FY19 and FY24, the company achieved a 36% compound annual growth rate (CAGR) in revenue, with prospective industry-leading growth rates in revenue, EBITDA, and profit after tax (PAT) anticipated through FY27.