Motilal Oswal has reaffirmed its 'Buy' rating on Trent Ltd with a price target of Rs 3,500, citing a recovery in Q4 FY26 sales and an ambitious multi-year expansion plan. The retailer's strategy centers on scaling its Zudio and Westside formats, though investors are cautious about store productivity and high valuation multiples.
What Happened
Domestic brokerage Motilal Oswal has maintained its 'Buy' rating on Trent Ltd, keeping the target price at Rs 3,500. This report follows the company’s recent 74th Annual General Meeting and the conclusion of its fiscal year 2026. After facing a period of cooling momentum in previous quarters, the company reported a recovery in sales during the fourth quarter of FY26. The brokerage highlighted Trent's robust expansion pipeline as a primary reason for its continued positive outlook, emphasizing that the company is effectively navigating a complex retail landscape.
The Expansion Roadmap
Trent’s growth strategy is underpinned by a significant scale-up of its key retail formats. The company plans to aggressively expand its Zudio network, with a long-term target of reaching 5,000 outlets, up from approximately 960 currently. Similarly, it aims to grow its Westside footprint to roughly 700 stores from about 300 today.
Beyond these core brands, the company is actively incubating new retail formats such as 'Samoh' and 'Burnt Toast' while diversifying into high-growth categories like beauty, innerwear, and footwear. The management’s focus remains on capturing market share in India's massive apparel sector, where the company still holds a relatively modest market share of about 2%, suggesting significant headroom for growth.
Financial and Valuation Context
For the full fiscal year 2026, Trent reported consolidated revenue of approximately Rs 20,074 crore and a net profit of Rs 1,721 crore. While these numbers provide a strong foundation, the company's valuation remains a point of discussion among market observers. The stock currently trades at high valuation multiples compared to its historical averages and some peers. Motilal Oswal's target price is grounded in a valuation of 45 times the FY28 estimated EV/pre-IND AS EBITDA for the standalone business, factoring in expectations of long-term earnings growth.
Execution and Competitive Risks
While the expansion plans are ambitious, they bring specific execution risks. New stores, particularly in Tier-2 and Tier-3 cities, often experience lower initial productivity compared to established metro outlets and require a longer maturation period to reach full efficiency. Analysts have noted that store productivity in these emerging micro-markets will be a critical metric to watch in FY27.
Furthermore, the retail sector faces intense competition from both domestic heavyweights like Reliance Retail and various global fashion brands. Rising rental costs and the availability of quality real estate pose additional structural challenges to the company’s rapid scaling plans. Investors are also monitoring how the company maintains its operating margins while simultaneously investing heavily in new store openings and supply chain infrastructure.
What Investors Should Track
Moving forward, the key monitorables for shareholders include:
- Store Maturity: The ability of new stores in smaller towns to improve productivity and mirror the performance of older outlets.
- Margin Trajectory: Whether the company can sustain healthy profit margins amidst aggressive expansion and competitive pricing pressure.
- Format Success: The uptake of newer concepts like Burnt Toast and Samoh as they move beyond the incubation phase.
- Sales Growth: Continued recovery in like-for-like (LFL) sales growth, which will be essential to validate the aggressive store addition strategy.