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Strong margin performance continues despite muted LFL

* Trent delivered another quarter of strong margin performance, with 36%/26% YoY growth in standalone pre-IND AS EBITDA/reported PAT.

* Standalone gross/pre-IND AS EBITDA margins expanded 150bp/195bp YoY, likely driven by favorable format mix and better inventory health.

* Revenue grew ~18.5% YoY (slight moderation vs. ~20% YoY in 4QFY26), mainly led by 33% YoY store additions as ~10% YoY SPSF decline continued. Fashion LFL remained in low single digits amid a focus on gaining market share in micro-markets over driving comparable store-level growth.

* Management reiterated that annual store additions remain on track, with a focus on deepening Zudio’s presence in tier 2/3 and peripheral markets, which are expected to mature over the next 2-3 years.

* Trent expects to offset input cost pressures through value chain interventions, broader supplier engagement, and calibrated price hikes.

* We raise our FY27-28E standalone EBITDA by 2-4%, largely driven by stronger-than-expected margin expansion. We now model an FY26-29E CAGR of ~21%/26%/19% in standalone revenue/Pre-Ind AS EBITDA/Adj. PAT.

* We reiterate our BUY rating with a revised TP of INR3,775, premised on 40x Sep’28E pre-IND AS EV/EBITDA for Trent standalone (Westside+Zudio).

* While valuations remain demanding at 62x FY28 EPS, sustained execution on store expansion, driving market share gains with potential upside on margins, and the scaling of emerging categories keep us constructive.

Healthy gross margin supports strong profitability

* 1Q standalone revenue at INR56.7b grew 18.5% YoY (disclosed earlier), driven by ~33% YoY net area additions as revenue per sqft dipped ~10% YoY (broadly similar to 4Q), likely due to lower productivity of new stores.

* Trent’s LFL growth for the fashion portfolio remained in low single digits.

* Gross profit grew 22% YoY to INR26.4b (in line) as gross margin expanded ~150bp YoY to 46.6% (~165bp ahead).

* Employee costs inched up ~23% YoY (5% above), while SG&A and other costs rose ~14% YoY (5% below).

* Trent’s occupancy cost (rentals above EBITDA) grew ~12% YoY, while lease rentals (below EBITDA) rose ~22% YoY, resulting in overall rental growth of ~15% YoY (vs. ~33% YoY net area addition).

* As a result, reported EBITDA grew 33% YoY to INR11.1b (6% beat) with reported EBITDA margins expanding ~205bp YoY to 19.6% (~165bp beat), driven by higher gross margin and operating leverage.

* As per the company, standalone pre-Ind AS EBITDA grew 36% YoY to INR8.5b, with pre-Ind AS EBITDA margin of 14.95% (up ~195bp YoY).

* Standalone Pre-Ind AS EBIT margin stood at 12.9% (up ~140bp YoY).

* Depreciation (+39% YoY) and interest costs (+14% YoY) jumped, while other income declined 26% YoY.

* PAT grew 26% YoY to INR5.3b (~6% beat) driven by higher EBITDA.

Star business: Modest pick-up in growth

* Revenue (ex-GST) grew 9% YoY (vs. 6% YoY in 4QFY26) to INR8.9b.

* Star added 2 net stores in 1QFY27 to reach 86 stores (opened 5, closed 3)

* Calc. annualized revenue per sqft declined ~5% YoY to INR23.9k and annualized revenue per store declined ~1% YoY to INR416m.

* Own brands now contribute ~74% to Star’s revenue (+100bp YoY)

Valuation and view

* Trent continues to prioritize cluster-level revenue growth and increasing its market share in key micro-markets over store-level LFL. The focus remains on deepening penetration in Zudio while ramping up store additions in Westside.

* Despite emerging raw material inflation and supply chain risks, Trent delivered another quarter of strong margin expansion. Management expects supply chain initiatives, supplier engagement, and calibrated pricing to help preserve the margins.

* We raise our FY27-28E standalone EBITDA by 2-4%, largely driven by strongerthan-expected margin expansion. We now model an FY26-29E CAGR of ~21%/26%/19% in standalone revenue/Pre-Ind AS EBITDA/Adj. PAT.

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