Shares of Trent plummeted as much as 13.5% on July 4 after the company warned of a slowdown in revenue growth at its latest annual general meeting (AGM), souring investor sentiment.
During the AMG, the management outlined the growth outlook for Q1 FY26, which appears muted in light of the company’s strong historical performance of around 35% CAGR over FY20–25.
The current run rate also falls short of the management’s aspiration of sustaining 25% growth over the coming years. This discrepancy prompted Nuvama Institutional Equities to revised their growth estimates for Trent, bringing expectations in line with current performance trends.
To that effect, Nuvama trimmed its FY26/27 revenue and Ebitda estimates for Trent by -5%/-6% and -9%/-12%, respectively.
While Nuvama sees hope in Zudio Beauty and the Star business turning into the next big growth levers for Trent, but still feels these businesses need to stabilise before scaling up.
On the other hand, Nuvama also downgraded its rating on Trent to ‘hold’ to factor in the growth slowdown. Side-by-side, the brokerage firm also slashed its price target for the stock by over 11% to Rs 5,884, implying a downside potential of around 5% from the last closing.
Meanwhile, the faltering revenue growth for Trent has turned into a major risk for the company, more so when put in the face of the high valuations of the stock. The stock trades at a trailing twelve month price-to-equity ratio of 123.49, leaving less room for a growth slowdown.
And analysts at HDFC Securities agree. The brokerage believes that while Trent remains a stellar business, the ask from the company is too high, majorly from a valuation stencil. “Westside seems to be showing signs of customer fatigue, while Zudio seems to be peaking in terms of unit economics,” HDFC Securities noted.
On that account, the brokerage now build in 23% revenue and PBT CAGR over FY25-27 for Trent, which stands at a 8-10% discount over consensus estimates. HDFC Securities also holds a ‘sell’ call on Trent, with a price target of Rs 4,300, anticipating a massive downside of 30% from the last closing level.
