Tata Group Stock: This outperforming stock of Tata Group may climb to new all-time high

New Delhi: First Kovid and now inflation! So far, Tata GroupThe U.S. retail apparel firm has not only managed to deliver great returns to its shareholders over the years, but has outperformed its peers as well.

And given the company’s focus on growth, improved return profile and revival in consumer sentiment, it is likely to maintain its lead.

The company reported nearly 53 per cent revenue growth in Q4FY22 on a standalone basis, the highest among peer retail players as consumer sentiments improved with gradual reopening of the economy. Brokerage Axis Securities expects this momentum to continue in the coming quarters as well, especially when FY23 is likely to be freed from the Covid-induced restrictions, it said.

The firm – which operates brands such as Westside, Judio, Star, Zara – has built a strong inventory pipeline for spring summer 2022 in anticipation of healthy demand in Q1FY23. Further, it intends to build 135 stores each in FY23 and FY24 to capitalize on the strong demand outlook.

In fiscal 2012, Trent added 125 stores at Westside and Zoodio, for a total of 435 stores, which exceeded management’s guidance of 425 stores. During FY 19-22, Trent registered an impressive revenue CAGR of 15 per cent despite various constraints.

Zoodio has emerged as the new growth engine for Trent, with its scalable business model (one third the size of the Westside format) and strong acceptance with sharp price point assortment in Tier II and Tier III cities.

“The store-level economics of Westside and Zoodio remain strong, as evidenced by strong equal-to-growth and Westside’s annual revenue run-rate that was nearly double from FY22 levels (>Rs 5,000 crore). Emerging categories like beauty and personal care, innerwear and home also continued to gain traction with clients,” noted brokerage

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Trent’s performance is well ahead of its competitors and provides a huge runway for growth over the next 2-3 years, it added, providing the stock with a target price of Rs 1,430. This indicates a rise of more than 28 per cent over the previous close. The target is also above the all-time high of Rs 1,347 that the stock touched in April.

ICICI Direct generated 23 per cent and 25 per cent in revenue and EBITDA CAGR respectively in FY20-24E. Industry-leading performance and sharp recovery in earnings is expected to support premium valuation, it said, setting a short-term target price of Rs 1,275 for the stock.

“The company continues to have decent cash and investments of over Rs 600 crore, which will enable it to better deal with the current situation,” ICICIDirect said.

Retail sector companies are currently facing adverse effects from raw material inflation, revision in GST rate, reduction in rental concessions and geopolitical events.

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