Footwear company Metro Brands have given decent returns at a time when the overall market sentiment was reeling under pressure. Since the beginning, 2022 was a difficult year for the markets, first coming out of the third wave of COVID followed by expectations of an aggressive rate hike by Feb and finally the latest Russia-Ukraine war which led to a surge in oil prices and hence inflation.
When most stocks have given weak performances, this Rekha Jhunjhunwala stock has risen over 20 percent in 2022 year-to-date (YTD) and around 30 percent since it made a weak debut on the bourses on December 23, 2021.
The stock listed 13 percent below its issue price of ₹500.
Ace investor Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala holds a 14.43 percent stake in the firm company as per the December quarter shareholding data on BSE.
Despite the recent outperformance, broekrage houses remain bullish on the stock and see up to 34 percent upside in the stock.
Ambit Capital has a target price of ₹718 for the stock while Axis Securities has set a price target at ₹625.
3 analysts polled by Mintgenie also has a 'strong buy' call on the stock.
As per Ambit Capital, the near-term profitability of Metro Brands may be volatile due to raw material inflation and the risk of a slowdown in discretionary spending, however, it believes that the firm will build a scalable franchise in the long term.
It added that Metro Brands’ revenue per square foot of ₹16,800 as against ₹9,700 of Bata India during FY20 were among the highest among the footwear and apparel players.
Meanwhile, Axis Securities noted that strong earnings growth, robust cash generation will support the premium valuation of the firm. It sees March 2024 EPS CAGR at 52 times, a 10 percent premium to its target multiple for Bata India.
“We bake in 32 percent/34 percent revenue/ EBITDA CAGR over FY22-24 led by normalization of operating environment/ pent-up demand, accelerated store expansion and pivot to Omni,” the brokerage firm noted. While the key risks include slower retail expansion, disruption in vendor base, and online competition.
It further observed that historically, Metro has outperformed Bata India and registered higher revenue/ PAT and store opening CAGR exhibited by Metro Brands over FY10-20.
“There is immense scope for store expansion based on the potential for individual brands/ formats (largest brand Metro present only in 123 cities, 226 stores), comparison with Bata; a big gap of 498 cities between the two companies and Metro Brands is under-indexed in several large cities as well; and comparison with retail peers in other formats (apparel, Jewelry, QSR, etc.) with similar mid-to-premium positioning indicates potential to double city count for Metro Brands,” Axis Securities said.
For Q3FY22, the firm reported a 54.63 percent jump in its consolidated net profit at ₹100.85 crore versus a net profit of ₹65.22 crore during the year-ago period. Its total revenue from operations also rose 59 percent at ₹483.77 crore during the quarter under review against ₹304.21 crore in the corresponding period of the previous fiscal. It had raised ₹295 crore through the initial public offer in December last year.
It was the best quarterly revenue, EBITDA and PAT in the history of the company, said company CEO Nissan Joseph post the earnings.
Established in 1955, Metro Brands is positioned as a family footwear store catering to consumers in the mid and premium segments. It has 226 Metro branded multi-brands outlets (MBO) format stores spread across 123 cities. It retails footwear under four different brands/ formats of Metro, Mochi, Walkway and Crocs.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.