Trent Ltd. is part of the Tata group of companies and was one of the early entrants to the organized retail industry in India. National brokerage and research firm Axis Securities has recommended Trent as its top stock pick of the week because it expects the company’s recovery momentum to continue in S2FY22.
Trent’s fashion sector saw a remarkable recovery in S1FY22 and momentum is expected to continue in S2FY22, as well as thanks to a strong party and wedding season, according to the brokerage. This will lead the company to return to profitability after witnessing a negative impact of the pandemic on its business.
Axis Securities recommended the buy rating on the share of the Tata group with a price target of ??1,180 per share. Although the ideal investment horizon for such ideas remains 6-9 months, the brokerage said its choices could offer opportunities for profit even to short-term investors.
Trent management has indicated a significant scale-up of the Zudio format, which is a value fashion game targeting 15-25 year olds. Zudio offers fashionable products with competitive prices across the entire product offering. This is a very profitable format with high revenues per square foot. With back-end processes and infrastructure aligned with Westside at the store level, Zudio has already become profitable, Axis pointed out.
âManagement continues to focus on reducing rents and other related charges and expenses by engaging with real estate partners. In addition, it seeks to varibalize certain expenses with those of income, including lease payments, thereby easing downward pressure on margins. Initiatives to reduce costs and increase the scale of operations, Trent could report a significant improvement in margins during the third quarter and the fourth quarter of fiscal 22 â, indicates the brokerage note.
The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.
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