Shares of Tata Group Zudio store operator have surged 250% in the past year. Buy, sell or hold? Experts weigh in

Tata Group shares have delivered impressive gains over the last 10 years.

Trent stock has been the best performing stock in the BSE 100 index over the last one year, the last three years and the last ten years. While the stock is up 250 per cent in the last one year, it is up a solid 650 per cent in the last three years, 1,400 per cent in the last five years and over 6,200 per cent in the last ten years. ₹An investment of Rs 2 lakh in these shares 10 years ago would have made you a millionaire today.

Trent operates a portfolio of retail concepts including Westside, Zudio and Star. Its stellar performance in Q1FY25 led to the recent surge in the stock price. The company’s revenue grew by 56.16 percent year-on-year (YoY), while profit posted an impressive 126.3 percent YoY growth. Many brokerage firms have expressed bullish views on the stock following the Q1 results.

Trent has seen significant growth over the last few years and, given India’s growing middle class and the size of its retail sector, there is significant room to grow.

According to Trendlyne, an equity research platform, Trent has seen significant expansion between FY22 and FY25 so far. Its total revenue has increased from ₹379.6 crore in Q1 FY22 ₹4,038 crore in Q1 FY25. Net profit increased to ₹342.2 crore in Q1 FY25 from loss ₹84 crore in Q1 FY22. Basic Earnings Per Share (EPS) increased from – ₹2.4 in Q1 fiscal year 2022 to ₹9.6 in Q1 fiscal year 2025.

The company is investing in omni-channel capabilities and an online presence to adapt to changing customer demands.

However, the stock’s rapid price gains have stretched its valuation. The stock’s price-to-earnings (PE) and price-to-book (PB) ratios are high in the industry.

Mint consulted with a variety of experts to get their insights into the stock. Here’s what they said:

Basic views

Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio

Trent delivered solid results in the first quarter of fiscal year 2025 and maintained good growth momentum despite weak demand.

The company’s revenues increased year-on-year by an impressive 56.2 percent. ₹4,104 crore in Q1 FY25 (5Y CAGR of 40%), mainly driven by Zudio’s dynamic retail expansion and strong same-store sales (SSSG) growth across all fashion segments.

Trent’s EBITDA increased by 57 percent year-on-year ₹659 crore, which increased the EBITDA margin to 16.01 per cent (marginal improvement of 10 bps YoY).

Trent continued its expansion, with Westside stores reaching 228 (six new stores opened and 10 relocated), Zudio 559 (14 new stores opened) and Star 72 stores in Q1 FY25.

Trent continues to deliver strong performance, delivering double-digit like-for-like sales (LFL) and strengthening its presence across multiple fashion concepts.

Despite industry headwinds and weak demand, Trent continues to stand out in the retail sector.

Improving financial results across all formats, reducing losses at Star and greater dynamism at the Inditex joint venture will benefit the company.

Sneha Poddar, Vice President, Research, Brokerage and Distribution, Motilal Oswal Financial Services

Trent’s strong performance, with double-digit LFL growth and solid presence growth, remains an exception in a retail industry facing a challenging demand environment.

Unlike its competitors, which avoided steep increases in raw material (RM) prices last fiscal, Trent absorbed the impact, enjoying positive customer response, and is now reaping the rewards as RM prices have turned benign.

Moreover, despite aggressive store openings, the company’s balance sheet risk and operational weakness were limited.

Trent’s industry-leading revenue growth, driven by healthy SSSG and productivity, solid footprint expansion, and significant Zudio growth, creates tremendous growth opportunities over the next three to five years.

The company’s grocery segment, Star, has just 72 stores and fiscal year 2024 revenue of ₹2750 crore, has been recording strong LFL growth. This is a huge growth opportunity. The brand strategy and carefully curated assortment have enjoyed strong customer response.

“We estimate CAGR of 41 per cent, 44 per cent and 52 per cent in unit revenue, EBITDA and PAT, respectively, during FY2024-26, driven primarily by 25 per cent annual store additions and healthy SSSG,” Poddar said.

Master Capital Services

Despite the weak consumption pattern reported by other retailers, Trent maintained its strong performance, resulting in significant inventory growth in 2024.

Thanks to better cost control and operating leverage, profitability continued to increase.

Further growth potential results from maintaining this dynamics and improving sales indicators in stores.

During the first quarter, a total of 14 Zudio stores were opened, while a total of 4 Westside stores were closed; as a result, there was a slight net increase in the number of stores.

Regardless, the company expects to open 200/20 Zudio/Westside locations in fiscal 2025.

The company’s focus on product assortment and store expansion is likely to drive future growth across all retail formats.

Positive signs for the business include better-than-expected profitability across all formats, reduced losses at Star Bazaar and increased traction for its joint venture with Inditex.

Technical views

Mandar Bhojane, Equity Research Analyst, Choice Broking

Trent recently reached a record high ₹7324.85. This significant upward movement and high trading volumes indicate a strong upward trend in the stock market.

“Investors and traders are encouraged to hold positions while moving their stop losses as the stock shows strong potential for further growth. Given the current trajectory, the long-term objective ₹“10,000 is doable,” Bhojane said.

“However, if stocks correct from these high levels, the zones around ₹6000 and ₹5000 can be considered as strategic buying opportunities on dips. Such pullbacks can offer attractive entry points for those looking to build or grow their positions in Trent, taking advantage of the stock’s long-term growth prospects,” Bhojane said.

“The Relative Strength Index (RSI) is at 97.21, firmly in overbought territory. Similarly, the Stochastic RSI is trading at a year-to-date high of 100, suggesting that while the stock is overvalued, the uptrend remains dominant,” Bhojane said.

Jigar S. Patel, Senior Manager, Equity Research, Anand Rathi Share and Stock Brokers

Trent stock is trading well above major exponential moving averages (EMAs), specifically the 21-day, 50-day, 100-day and 200-day EMAs.

When a stock’s price is significantly above these averages, it is often an indication that it may be overvalued or overbought, meaning that the price has risen too quickly or is deviating significantly from its average.

This situation increases the likelihood of a “reversion to the mean,” meaning the stock price could correct or approach average levels.

Additionally, the stock’s hourly chart is showing a bearish divergence, which is another worrying technical indicator.

A bearish divergence occurs when a stock’s price is rising and an indicator such as the RSI, or Moving Average Convergence Divergence (MACD), begins to fall.

This divergence indicates that the growth momentum is weakening and a price reversal or correction may be inevitable.

“Given these signals, the analysis predicts a potential decline in the price of Trent, expecting it to fall to ₹“We expect prices to rally towards 6,900-7,000 in the next few trading sessions,” Patel said.

“It is advisable to book profits. Investors should consider selling some of their holdings to secure profits while the stock is still trading higher. It is also advisable to avoid taking new long positions,” Patel said.

Application

Most experts believe that Trent’s long-term prospects are good and that it is still a good stock to buy.

However, in the short term, investors may consider taking some profits as the sharp rise in stock prices has boosted their valuation, which could indicate a possible correction.

Experts say investors with a long-term time horizon may open new long positions in stocks in the event of a correction.

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Reservation: The above views and recommendations are those of the individual analysts, experts and brokerage firms and not Mint. We recommend that investors consult certified experts before making any investment decisions.