Trent has multiple businesses that are in different stages of growth, profitability, and scale; hence, we believe that a SoTP-based approach is appropriate to value the stock. We arrive at a target price of Rs7,150. 

Standalone: We value standalone entity at 50x EV/EBITDA on June’27E, leading to FV of Rs6,600/share. We believe a higher multiple is justified given better growth outlook - we estimate 26%/26% revenue/EBITDA CAGR over FY25-28E (vs 39%/36%/55% CAGR over FY20-24). While our target multiple implies a (15-25%) premium compared with other Consumer Discretionary and  Retail companies, we believe that either of these comps is not comparable with Trent given: (a) significantly higher growth (along with profitability); (b) better track record of building new growth drivers; and (c) depressed profitability given higher store growth. 

Star: We value Star on 5x June’27E EV/Sales – in-line with DMart’s current valuation given better growth (we estimate 30% revenue CAGR over FY25-28E) but lower profitability (3.8% EBITDA margin by FY27E).

Zara: 20x June’27E EV/EBITDA – in-line with peers with similar growth trajectory and at ~60% discount to our standalone business (given relatively slower growth vs standalone business - we estimate 9% revenue CAGR for Zara vs 26% for standalone business).

Trent is already net debt free and cash is valued at Rs100/share.

Key downside risks that could cause Trent’s stock price to trade below our target price include: (a) slowdown in the pace of store expansion; (b) further slowdown in discretionary spending by consumers; (c) increase in competitive intensity from new and existing players; (d) higher raw material price bundled with Trent’s inability to take commensurate price hike; (e) limited traction in new formats; and (f) inability to launch new product/design in-line with latest fashion trends.

Key upside risks that could cause Trent’s stock price to trade above our target price include: (a) significant improvement in overall consumer sentiment leading to pick-up in demand; (b) successful scale-up of new formats; (c) better-than-expected improvement in growth and profitability for Star; and (d) increase in the pace of store acceleration for Westside and Zudio.