Trent Ltd: Risk Reward Update

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Trent Ltd: Risk Reward Update

UpdateM

RiskRisk RewardReward– Trent -LtdTrent(TREN.NS)Ltd (TREN.NS)

Long-term Play

PRICE TARGET Rs4,727.00 OVERWEIGHT THESIS

Residual income model, probability-weighted 25% bull, 60% base, 15% bear. Higher bull-case ▪Trent has built a resilient business model

weighting reflects the record of consistently strong revenue/earnings growth in the fashion with moats around brand, customer

segments, while the bear case factors in any risks to growth from macro or company-specific relationships and loyalty, and an efficient

challenges that may arise. Key assumptions: cost of equity 12.22% (risk-free rate of 7%, risk supply chain. This has resulted in strong

premium of 6%, beta of 0.87) and terminal growth rate of 6%. industry-leading top-line performance.

the medium term, we see the Rs4,837.96 ▪Over

business moats between Trent and its

Consensus Price Target Distribution Rs4,100.00 Rs5,450.00 competitors continuing to expand on the MS PT

back of its aggressive and well-devisedSource: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates

growth strategy. We also expect the

company to maximize any opportunities to

build new formats.

RISK REWARD CHART ▪Absolute valuations are expensive, but we

believe earnings outperformance over the

long term makes a case for the multiple

INR premium to continue.

Rs6,181.00Rs6,181.00(+52.59%)Rs6,181.00(+52.59%)(+52.59%)

6000 Consensus Rating Distribution

72% Overweight

Rs4,727.00Rs4,727.00(+16.70%)Rs4,727.00(+16.70%)(+16.70%)

4500 20% Equal-weight

Rs4,050.60Rs4,050.60Rs4,050.60

8% Underweight

MS Rating

Rs2,974.00Rs2,974.00(-26.58%)Rs2,974.00(-26.58%)(-26.58%) Source: Refinitiv, Morgan Stanley Research

Risk Reward Themes

Secular Growth: Positive