Trent Ltd - Q2FY21 First Cut (Standalone) - ICICI Direct

(CMP: Rs. 678, MCap: Rs. 24103 crore)

Trent reported decent set of Q2FY21 results, with revenue coming in above our estimates, whilst profitability was broadly in line with our estimates. With gradual opening of stores, revenues have improved on a month on month basis. As on date all its stores are operational, however, selectively at the local level certain restrictions continue to apply and consequently impact trading performance. Revenues for month of October have reached 70% of pre-covid sales vs. 38% in July.

Q2FY21 Earnings Summary

- Standalone revenues (which includes Westside, Zudio and Landmark formats) de-grew by 44.7% YoY to Rs. 452.1 crore in Q2FY21 (I-direct estimate: 47.0% de-growth). Company has witnessed significant sequential improvement, with trajectory improving month on month.

- Owing to higher discounting, gross margins declined sharply by 695 bps YoY to 40.9%. However company has significantly curtailed operating overheads, with employee and other expenses declining by 31% each to Rs. 57.4 crore and Rs. 121.3 crore, respectively. Subsequently, company reported EBITDA of Rs. 6.4 crore (Q1FY21: Rs. 119 Crore loss; I-direct estimate: Rs. 8.2 crore), with margin of 1.4% (I-direct estimate: 1.9%).

- Other income came in at Rs. 36.4 crore of which Rs. 22.4 crore pertains to lease rent waiver. Reported PBT losses narrowed down sequentially to Rs. 73.3 crore (Q1FY21: Rs. 182.2 crore loss, I-direct estimate: Rs. 72.7 crore). Owing to deferred tax asset (Rs. 25.2 crore), company reported net loss of Rs. 48.1 crore (Q1FY21: Rs. 139.5 crore loss).

- On the B/S front, better inventory management has resulted in working capital release of Rs. 167.7 crore. Negative FCF worth Rs. 68 crore was funded through company's healthy liquidity position (cash & investments worth Rs. 534 core as on September 2020).

Company has witnessed encouraging response with improved consumer sentiments and traction in the recent weeks running upto Diwali. Online channels witnessed 50% growth over previous period post lockdowns. Company continues its accelerated store expansion strategy with 11 additional stores in H1FY21 (8 Zudio, 2 Westside, 1 Landmark).

We will be coming out with a detailed report.

Shares of TRENT LTD. was last trading in BSE at Rs.678.05 as compared to the previous close of Rs. 668. The total number of shares traded during the day was 10075 in over 828 trades.

The stock hit an intraday high of Rs. 687 and intraday low of 663.3. The net turnover during the day was Rs. 6791683.

Source : Equity Bulls

Keywords