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Steady Growth Momentum; Maintain BUY

Est. Vs. Actual for Q2FY27: Revenue – INLINE; EBITDA – BEAT; PAT – MISS Changes in Estimates post Q2FY27

FY27E/FY28E: Revenue: 0%/0%; EBITDA: 0%/0%; PAT: 0%/0%

Recommendation Rationale

* Financial Performance: Trent delivered a strong performance in Q2FY27, reporting revenue of Rs 5,788 Cr, up 22.5% YoY, supported by resilient consumer sentiment. Ongoing product elevation and premiumization expanded the company's addressable market, with the fashion portfolio recording mid-single-digit like-for-like growth and emerging categories—beauty, personal care, innerwear, and footwear—contributing over 21% to total revenue. EBITDA margin expanded 99 bps YoY to 18.2%, aided by a 121-bps improvement in gross margin despite inflationary pressures, driven by strategic merchandise sourcing, optimised price architecture, disciplined distribution, and prudent inventory provisioning.

* Store Expansion: During Q2FY27, Trent added a net 17 Zudio stores and 10 Westside stores, expanding its total retail network to 311 Westside stores, 999 Zudio stores (including seven in the UAE), and 32 other lifestyle stores, spanning over 18.5 Mn sq. ft. Store additions focused on deepening presence in established markets while accelerating rollouts into Tier 2, Tier 3, and hinterland locations, backed by strong consumer reception across smaller cities.

* Demand Outlook: The structural outlook for organised fashion retail remains bright, fueled by increasing formalisation, rising aspirations, and strong consumption across non-metro and Tier-1 cities. To drive consistent performance, Trent continues to prioritise operating efficiencies, store upgrades, and enhanced brand salience. Meanwhile, proactive sourcing and strong supplier partnerships help the company absorb persistent cost inflation—spurred by geopolitical tensions and supply chain bottlenecks—while keeping its customer value proposition intact.

Sector Outlook: Positive

Company Outlook & Guidance: We maintain our BUY rating, supported by a strong long-term growth outlook and structural strengths in the business.

Current Valuation: SOTP

Current TP: Rs 3,220/share (Previous TP: Rs 3,640/share).

Recommendation: With a 12% upside potential from the CMP, we maintain our BUY rating on the stock.

Financial Performance

The company’s revenue grew 22.5% YoY to Rs 5,788 Cr, while like-for-like growth for the fashion portfolio in Q2FY27 continued to be in the mid-single digit. EBITDA increased by 29.6% YoY, while EBITDA margins improved by 99 bps YoY to 18.2%, led by Gross margin expansion of 121 bps to 44.5%. PAT stood at Rs 490 Cr, up 8.6% YoY.

Outlook

Trent continues to post robust revenue growth despite macro headwinds. The recent correction in the stock price enhances the risk-reward profile, offering an attractive entry point for long-term investors. With structural tailwinds in organised retail and significant headroom for market share gains, Trent is well-placed to capitalise on the sector’s multi-year growth opportunity. Furthermore, the reduction in GST is a welcome step and is likely to augur well over time. The company’s long-term outlook remains constructive, supported by continued sales outperformance, rapid store expansion, and dynamic product assortments, which are driving higher footfall. Margin improvement across formats, along with the successful application of Trent’s private-label-led strategy to Star, reinforces earnings visibility. New growth avenues, including UAE expansion, Zudio Beauty, and entry into the LGD jewellery segment, are expected to further strengthen the growth trajectory.

Valuation & Recommendation

We remain positive on the company and value it on an SOTP basis. We maintain our BUY rating on the stock with a revised TP of Rs 3,220/ share, which implies an upside of 12% from the CMP.

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SEBI Registration number is INZ000161633