Stocks to buy: Trent, Westlife Foodworld, Ethos among Axis Securities’ top picks in Retail sector

Retail companies reported mixed performance in the first quarter of FY25, with premium retailers sustaining their growth momentum, while value retailers seeing a gradual recovery. The Quick Service Restaurant (QSR) segment continues to remain weak.

The rural segment saw growth and is expected to improve further. Going forward, volume growth is expected to pick up in rural regions, driven by increased government spending, a normal monsoon, easing inflation, and rising urban remittances.

According to Axis Securities, despite a challenging environment, most companies in its coverage universe have maintained or increased their store opening guidance as they expand into smaller towns, with long-term growth levers remaining strong.

“The Indian retail market is still largely unorganised, presenting a significant opportunity in smaller cities and towns. With rising disposable incomes, consumers are increasingly opting for branded products. Smaller cities and towns are growing faster than metros across categories like Apparel, QSR, and Footwear, driven by higher aspirations for branded products and rising disposable incomes,” Axis Securities said while expecting India’s structural story to continue.

Axis Securities has recommended three stocks to buy in the retail sector after Q1 results. These stocks to buy list include Trent, Westlife Foodworld and Ethos Ltd. The target price suggested for these stocks is based on Q1FY25 result update. The brokerage firm remains positive on the stocks’ long-term prospects and recommends ‘Buy on Dips’. Here are the details:

Trent | Buy | Target Price: ₹7,000

Axis Securities expects Trent to deliver robust revenue growth in the coming quarters, driven by increased footfall, strong performance across categories and channels, and continued store expansion. Additionally, enhanced earnings across all formats, reduced losses at Star Bazaar, and improved traction at the Inditex JV signal positive momentum for the company.

In recent years, Trent's adoption of a small-format store model for Star Food, emphasizing sharp pricing and a focus on fresh produce and private labels, has delivered promising results, the brokerage firm noted.

It has a ‘Buy’ rating on Trent shares with a target price of ₹7,000 apiece.

Westlife Foodworld | Buy | Target Price: ₹915

The brokerage house remains optimistic about Westlife Foodworld’s long-term prospects, supported by its impressive execution, as reflected in a Revenue and EBITDA growth of 17% and 51% over FY16-20. This growth was driven by strategic product launches and cost optimization initiatives.

Looking ahead, we expect healthy Revenue and EBITDA CAGR growth of 12% and 13% over FY23-26E.

It has a ‘Buy’ call on Westlife Foodworld shares with a target price of ₹915 apiece.

Ethos | Buy | Target Price: ₹3,600

Axis Securities maintains a positive outlook on Ethos, supported by the company’s robust and consistent performance in recent quarters. The brokerage firm expects the company to report robust Revenue and PAT CAGR growth of 33% and 40%, respectively, over FY24-FY27E.

It has a ‘Buy’ rating and Ethos share price target of ₹3,600 apiece.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.