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  • 11 Feb 2022
  • ICICIdirect Research

TRENT SEES ANOTHER QUARTER OF INDUSTRY LEADING REVENUE GROWTH

TRENT - 7233 Change: 22.65 (0.31 %)

News: Trent reported superlative revenue growth coming in higher by ~55% compared to pre-Covid levels (Q3FY21). On a favourable base, revenue grew 86% YoY (32% QoQ) to Rs.1347.8 crore (two-year CAGR: 24%, I-direct estimate: Rs.1182.4 crore). We believe the growth is mainly driven by healthy store addition pace especially in Zudio format. Trent’s Westside format registered revenue worth Rs.1000 crore (74% of revenue) with SSSG of 9% compared to pre-Covid levels and 49% compared to last year. During Q3FY22, company reported gross margins of 51.2% (down 513 bps YoY) which were lower than our expectation of 54%. We believe increased RM prices may have impacted margins. However, significantly higher revenues negated the negative impact of lower gross margins to a certain extent. EBITDA margins declined 320 bps YoY to 21.6% (I-direct estimate: 24.0%). Absolute EBITDA grew 62% YoY to Rs.291.7 crore (two-year CAGR 30%, I-direct estimate: Rs.284 crore).

Views: Trent reported a mixed operational performance in Q3FY22. Revenue trajectory continued to be robust with significant beat on our/consensus estimates and reported industry leading growth over pre-Covid levels. Emerging categories like beauty and personal care, innerwear and home witnessed healthy traction. In 9MFY22 company has added 67 new stores taking the total count to 197 Westside and 177 Zudio stores. The company expects to exit FY22 with combined stores (Westside+Zudio) of more than 425. Trent has, over the years, consistently outperformed peers given the strong brand patronage (Westside, Zudio, Star, Zara) and proven business model (Westside: 100% private label). The robust recovery depicts the inherent strength of the business model. We remain positive on the stock.

Impact: Positive