Promotion to the Nifty 50? Check. A bold expansion into cosmetics? Check. A staggering 130% rally this year? Triple check.
The Tata Group retail darling, which operates chains under Westside and Zudio brands as well as Zara stores in India, is living its best life rn. But when you’re on top, the only way is… down?
Mastering middle-class chic
Trent has mastered the art of selling “middle-class chic,” going from an aspirational brand to being everyday shopping (the kind where you actually walk into a store) destination for India’s growing middle class.
With disposable incomes on the rise, Trent has gone from catering to the “old money” to becoming the MVP for retail therapy on a budget. The result? The stock’s a 10-bagger, with an over 1,400% stock price jump from a Covid-19 slump.
But is it worth jumping in now? Well, at 115x earnings, this isn’t exactly a bargain buy. For comparison, the Nifty 50 trades at 21x earnings.
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Long game
Revenue growth of over 50% in four of the last five quarters and profits doubling sound great — until you look at that valuation.
The market’s already priced in a rally for next year, says Avinash Gorakshakar of Profitmart Securities. If you’re in for the long game i.e you can “hold for two to three years, it’s a great stock.”
“I don’t think you’ll see a sporadic rise” in the stock price in the short-term, he adds.
Top brokerages like Bernstein, Goldman Sachs and Citi have initiated coverage with bullish ratings in recent months, and two-thirds of analysts recommend the stock with a “buy” rating.
But there’s almost no upside left, based on analysts’ average estimates, according to LSEG data.
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The big question
Trent’s grabbing attention because of its entry in the Nifty 50 index in September. But the stock has pulled back about 15% from an October peak amid a broader market decline.
Its strength lies in its focus on India’s middle class, which grew to 45.4% of the population in 2023, up from 33.1% in 2022, according to People Research of India’s Consumer Economy.
As this segment expands, Trent’s dominance in both mind and wallet share could mean even more growth ahead.
Perhaps investors actually need to decide if they’re buying into the long-term potential — or hype — around India’s middle class.
