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MOSL: Morning India (11/July/19): 1. Trent (Preparing for next leg of growth); 2. AU Small Finance Bank; 3. Fuel or Engines (Economy); 4. NMDC; 5. Cement

MOrning India (11/July/19): 1. Trent (Preparing for next leg of growth); 2. AU Small Finance Bank; 3. Fuel or Engines (Economy); 4. NMDC; 5. Cement

 

Today’s top research idea

Trent: Preparing for next leg of growth; Focus on Westside and Zudio

• Trent (TRENT) appears well positioned to capitalize on India's high-growth retail apparel market, given its ability to execute well in a fast-changing operating environment. The company is embarking on an accelerated growth strategy, particularly at Westside and Zudio, both of which hold a strong brand promise.
• Subsequently, we have revised our store addition estimate for Westside/Zudio to 35/40 annually v/s 23/25 earlier. Keeping in mind its ambitious plans and accelerated growth, the company has announced equity fund raising plans of INR15.5b to expand its capabilities and remains net cash. Over FY19-21, we expect revenue/EBITDA/PAT CAGR of 24%/29%/62%.
• TRENT is likely to face near-term impact of equity dilution on earnings growth and RoIC. However, over a three-year period, the dilution could drive accelerated growth, which, in our view, is not fully captured in valuations as of now. Subsequently, we raise our SOTP-based TP to INR500 (v/s INR440 earlier).

Piping hot news

No question of rolling back surcharge on FPI trusts, says Finance Ministry

The government has ruled out a rollback of the ‘super-rich’ tax on foreign portfolio investors (FPIs) organised as trusts or association of persons. The tax on such FPIs will yield an estimated Rs 400 crore, as against the overall revenue gain of Rs 12,000 crore from the surcharge.