Trent shares in focus after positive EBITDA surprise in Q3; Some analysts remain skeptical

Shares of Tata Group's Trent Ltd.

will be in focus on Thursday, February 5, after the company reported results after market hours on Wednesday evening, which were positive on the operating front.

The company reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of ₹1,081 crore, a growth of 27.6% compared to the same quarter last year. The number was also higher compared to the CNBC-TV18 poll estimate of ₹1,000 crore.

In its investor presentation, the management of Trent also highlighted that the medium-term outlook continues to remain positive, even as the Like-for-Like growth for the fashion portfolio was marginally negative during the quarter due to the festive season shift.

At the end of the third quarter, beauty & personal care, innerwear and footwear, contributed to over 21% of the company's topline.

For the Star business, own brands are now contributing to 74% of its topline and the management is now looking at accelerating the expansion of Star stores.

Brokerage firm Bernstein maintained its "outperform" rating on Trent and a price target of ₹5,000, stating that the margin improvement trajectory is sustainable and that the stock will now depend on the same store sales growth for further outperformance, given that the employee cost leverage has played out.

Jefferies maintained its "hold" rating with a target of ₹4,575, stating that the revenue growth during the quarter was at a multi-quarter low, but operating performance was a surprise. It added that despite the sharp stock correction, it prefers to stay on the sidelines unless there is a clear sign of a sustained recovery.

Citi has a "sell" rating on the stock with a target of ₹4,350, stating that it sees risks to margins, given that the gross margin expansion is not sustainable owing to the change in business mix. It added that given the quality of the beat, profitability would not sustain either.

Goldman Sachs also has a "neutral" rating on the stock with a price target of ₹4,530. It said that the negative like-for-like growth in Q3 is a risk to Trent's growth and margin estimates for financial year 2027-2028.

28 analysts have coverage on Trent, of which, 18 have a "buy" rating, six have a "hold" rating, while four others have a "sell" rating.

Shares of Trent had ended with gains of over 5% on Wednesday ahead of the results announcement, closing above the mark of ₹4,000 for the first time after January 12. The Tata Group stock is still down over 40% from its October 2024 peak of ₹8,345.