Trent shares soar 7% after Q2 results. Here’s why Elara Capital, Nuvama remain bullish on the Tata stock

ETMarkets.com

Brokerages see scope for earnings growth and margin improvement, even as store expansion and like-for-like sales remain key monitorables.

Consolidated revenue from operations on a consolidated basis rose 21.9% YoY to Rs 5,873.14 crore in Q2FY27, up from Rs 4,817.60 crore in the year-ago period. Speaking on the company's performance, Noel N Tata, Chairman of Trent, said its brands saw solid traction during the quarter, with consumer sentiment remaining robust despite the relatively inflationary environment.

Buy, sell or hold Trent shares after Q2

Elara Capital upgraded Trent to 'Buy' from 'Accumulate' and named it a top sector pick, raising its target price to Rs 3,600 from Rs 3,500. The upgrade reflects stronger medium-term earnings visibility and improving return ratios. The brokerage believes the 7% correction from the stock's three-month peak offers an attractive entry point. It projects EPS growth to accelerate to around 28% by FY28. The revised target price is based on 64 times September 2028 estimated standalone earnings.

Nuvama has assigned a Buy rating and a target price of Rs 3,466 per share. It said that another way to look at the operating performance is that at just mid-single-digit LTL growth, Trent achieved a 96bp YoY increase in operating leverage across rentals and other expenses, effectively offsetting a 67bp drag from rising employee costs. “We expect margin expansion to accelerate as LTL growth rebounds off a soft base, particularly in Q3FY26, where the fears of pressure on gross margin loom large,” the domestic brokerage said.

Systematix retained its 'Hold' rating on Trent but lowered its target price to Rs 3,242. The brokerage expects revenue to grow at a CAGR of 18.5% over FY26-FY29E, driven primarily by store additions across Westside and Zudio. Like-for-like (LFL) growth is expected to remain in the low-to-mid single digits over the medium term.

Systematix has factored in annual additions of around 150+ Zudio stores and 35+ Westside stores. However, increasing store density could lead to some cannibalisation across existing catchment areas.

The brokerage projects EBITDA to grow at a CAGR of 19.3% and adjusted PAT at 19.5% over FY26-FY29E. It estimates EBITDA margins at 19.2% in FY27E, 18.6% in FY28E and 18.7% in FY29E.

Profitability is expected to benefit from sourcing efficiencies, supply chain optimisation, technology-led productivity improvements and structural cost controls. These gains could be partly offset by elevated input costs and investments needed to support the expanding store network.

Key factors to watch include the sustainability of gross margin improvements, the pace of LFL growth and Trent's ability to maintain operating margins as its store network expands.