Radhakishan Damani Books Profit in Multibagger Tata Stock. Should You Too?

It's that pivotal time of the quarter again!

The top investing gurus have started sharing their portfolio moves as part of their filings.

In this article, we'll look at one such activity by Radhakishan Damani.

The ace investor has apparently booked partial profit in one of the Tata group stocks during the January-March 2024 quarter.

A Word About Radhakishan Damani

Radhakishan Damani is a Mumbai-based entrepreneur, businessman, and billionaire investor who founded India's mega-retail chain D-Mart.

Damani is one of the Big Bulls in the Indian stock market.

He manages his portfolio through his investment firms, Bright Star Investments and Derive Trading & Resorts.

Over the years, the veteran investor has invested in cement, technology, and retail sectors.

He is considered India's retail king after the March 2017 IPO of his supermarket chain, Avenue Supermarts.

Which Tata Group Stock did Radhakishan Damani Sell?

The Tata group company in question is none other than Trent.

According to the latest shareholding pattern filed by the retail company, Damani has booked partial profit.

Every quarter, investors holding over 1% stake in a company must share their portfolio moves as part of their filings.

These filings can be goldmines, providing unique insights into recent decisions made by some of the best money managers.

In the preceding quarter, Damani held around 1.5% stake or 54,21,131 shares of Trent. The latest filing shows that Damani now holds 1.3% stake or 48,07,407 shares.

While we do not know for sure why exactly Damani bought partial profits into this counter, there are some explanations...

The first and foremost reason being profit booking.

You see, shares of Trent have been on a non-stop rally for the past one year.

Trading at Rs 1,200 a year ago, shares have rallied over 190% and currently trade at Rs 3,988 per share.

In fact, Trent was among the top performing Tata group stocks of 2024.

This sharp rally has taken Trent shares to a price-to-earnings ratio (P/E) of 169.2x, as against 115.3x as of 31 March 2023.

The price to book value (P/BV) has also gone up to 43.6x from 17.5x in March 2023.

So an obvious reason why Damani booked profit could be considering the company's high valuations.

However, do note that Damani has not sold his entire holding and he continues to hold a decent quantity in Trent.

Trent: Strong Growth Prospects May Defy High Valuations

Despite high valuations, the investing community is gung-ho on the Tata group company... and for good reason!

Trent is planning to invest around Rs 8 billion (bn) in capex to expand its operations and increase its physical stores across all retail concepts across the country.

This, along with the high demand for apparel and footwear, is expected to drive the company's performance in the medium term.

What's more, new concepts in ethnic wear and innerwear may keep the revenue trajectory higher for longer.

Trent is probably the only retailer in the country to compete with a completely private-label portfolio. Trent's brands are not sold on any other e-commerce sites, except Tata platforms.

In the past 5 years, strong demand and rapid expansion have helped the company grow its revenue at a CAGR of 26.3%.

The net profit also grew at a CAGR of 32.9% during the same period.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	26,302	34,860	25,930	44,980	82,420
Growth (%)	22%	33%	-26%	73%	83%
Operating Profit	2,824	7,060	3,856	7,692	13,743
OPM (%)	11%	20%	15%	17%	17%
Net Profit	970	1,229	-1,462	1,058	4,447
Net Margin (%)	4%	4%	-6%	2%	5%
ROE (%)	5.9	5.3	-7.7	1.5	15.9
ROCE (%)	10.6	17.7	2.1	15.9	32.3
Dividend (Rs)	1.3	1.0	0.6	1.7	2.2
Debt to Equity (x)	0.3	0.1	0.1	0.2	0.2

Data Source: Ace Equity

Trent currently operates over 780 stores under various retail concepts such as Westside, Zudio, Landmark, and Star across 155 cities in India.

How Trent Share Price has Performed Recently

In 2024 so far, Trent share price has surged 32%.

Trent has a 52-week high of Rs 4,244 touched on 11 March 2024 and a 52-week low of Rs 1,307 touched on 28 April 2023.

In the past one year, shares of the company have rallied over 190%.

Here's a table comparing Trent with its peers -

Comparative Analysis

Company	Trent	AB Fashion	Arvind Fashions	Avenue Supermarts	Electronics Mart
ROE (%)	15.9	-2.2	10.8	16.1	13.8
ROCE (%)	32.3	9.4	20.5	21.1	16.9
Latest EPS (Rs)	23.5	-5.8	5.1	37.4	4.7
TTM PE (x)	169.5	0.0	87.9	124.1	43.1
TTM Price to book (x)	43.6	8.2	6.3	16.7	5.8
Dividend yield (%)	0.1	0.0	0.2	0.0	0.0
Industry PE	0.0
Industry PB	18.4

Data Source: Ace Equity, Equitymaster

In Conclusion

Learning from the best investors is invaluable, but blindly replicating their trades can be fraught with pitfalls.

Microcap megastar Ian Cassel put it beautifully when he said...

• "You can borrow someone else's stock ideas but you can't borrow their conviction. True conviction can only be obtained by trusting your own research over that of others.
  
  Do the work so you know when to sell. Do the work so you can hold. Do the work so you can stand alone."

While it might be tempting to follow the investment moves of successful investors, it is crucial to conduct thorough research and analysis before making any investment decision.

Focus on investing in fundamentally strong companies that align with your individual goals and risk tolerance level.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...