Raamdeo Agrawal says Trent valuations ‘difficult to understand’ but price has momentum

Market Veteran and Motilal Oswal’s Raamdeo Agrawal believes that valuations in certain stocks have reached a point where it is getting difficult for even a “bullish person” like him to justify.

“So whenever there is a predictable growth, we are seeing massive demand, and at times the prices are running ahead of the underlying value,” he told CNBC-TV18 in an exclusive conversation on the sidelines of the Motilal Oswal Annual Global Investor Conference.

Agrawal cited the example of Trent, whose shares have risen 123% so far in 2024 and have more than tripled over the last 12 months, gaining over 235%.

At the current price, shares of the Tata Group company are trading at a one-year forward price-to-earnings multiple of 99 times, while for the current year, it trades at a price-to-earnings multiple of 141 times. The current year multiple is now above its five-year average of 118 times.

“I would think that prices, even in Trent, has reached a level which is very difficult to understand, but there is a momentum in the company’s performance as well as in the price,” Agrawal said.

For the June quarter, Trent reported revenue growth of 56% from the same quarter last year, while net profit more than doubled, rising 134%. EBITDA margin for the quarter also expanded by 90 basis points.

Another important trigger for Trent is the potential Nifty inclusion, which may happen anytime this week or the next one. In case that does happen, Nuvama Alternative & Quantitative Research expects inflows worth close to $500 million for the stock.

Shares of Trent are currently trading 2.8% higher at ₹6,685 and the stock has risen 30% in the last one month.

First Published: 

Aug 19, 2024 12:25 PM

IST