Shares of Trent were down nearly 4% at midday on April 28, a day after Tata Group Plc reported stellar figures for the March quarter but lower profits.

Trent posted a net profit of Rs 54.2 crore, compared with Rs 20.87 crore a year earlier, the company said after hours on April 27.

Operating income rose 64% YoY to Rs 2,182.8 crore from Rs 1,328.9 crore in Q4FY22. While EBITDA jumped 50.8% to Rs 203 crore, margins fell to 9.3% from 10.1%.

Trent, hit by disappointing margins, was trading at Rs 1,333 at 12 pm on the National Stock Exchange, down 3.5% from its previous close. The stock is flat for the year so far.

But analysts are not too worried. According to ICICI Securities, the lower margins can be attributed to Zudio’s increased revenue share, which accounted for about 35% of revenue according to its estimates.

Trent’s Zudio caters to value fashion, while Westside targets mid-to-high-end customers.

“Nonetheless, Zudio’s higher inventory turns are expected to offset lower gross margins and positively impact net margins,” it said.

The brokerage has a “buy” call on the stock with a target price of Rs 1,382.

HDFC Securities also attributed the lower margin to the front-loading of Zudio-related costs.

“Zudio’s blitz scaling remains a big driver for the company. We expect FY24/25 to mark higher absorption of fixed costs. Hence, our Sell rating at Rs 1,110,” it said in a note.

For Axis Securities, narrowing Star Bazaar losses and improving Inditex JV’s traction are positive signs for the company. It has a “buy” call on the stock with a target price of Rs 1,700.

IIFL Securities said the current valuation of 122 times earnings already reflects high growth in the medium term, leaving little room for execution error. It has an “add” rating and a target price of Rs 1,500.