Shares of Metro Brands, a footwear retail chain, rose 3.4 percent to Rs. 874.75 apiece in the last three trading sessions and surged 5 percent in a week.
The company on Tuesday posted a 10.78 percent rise in its consolidated net profit at ₹113 crore for the third quarter that ended December 2022. The company had posted a net profit of ₹102 crore during the same quarter of the previous fiscal.
Over the last six months, the stock climbed from ₹582.40 apiece to ₹874, producing a fabulous return of 50 percent. Also, the stock soared 94 percent from its one-year low of Rs. 505 to reach an all-time high of Rs. 980 on October 6, 2022.
Even after a significant increase in the stock price, brokerage firm ICICI Securities believes the stock has the potential to rise further. The brokerage stated that the company's Q3 performance came in better than estimated, driven by aggressive retail expansion, stabilisation of raw material costs, as well as an improvement in revenue mix that has helped to increase gross margins.
The revenue from operations was up 23.76 percent at Rs. 599 crore during the quarter as against Rs. 484 crore in the corresponding period of the previous fiscal.
The company added 48 stores during the quarter, which is the highest number of new store openings to date, the brokerage noted.
An incremental focus on distribution-driven revenue growth under the Fila and Proline brands (now consolidated in standalone financials effective December 1, 22) is key.
“The company's right mix of brands has provided a growth runway for store additions. Its emphasis on financial discipline, combined with its strong balance sheet, instils confidence in its execution. Besides, a platform of choice for international brands fosters confidence in new avenues of growth," said ICICI Securities.
Meanwhile, the company's online sales grew 57 percent YoY in Q3 FY23, contributing 8 percent of standalone sales. The brokerage noted that 25 percent of online business comes from omnichannel.
Metro highlighted that it has completed a 100 percent acquisition of Cravatex Brands Limited (CBL). ICICI expects a 5 percent revenue contribution from CBL.
The brokerage has a "buy" rating on the stock with a target price of Rs. 1,050 apiece, indicating an upside of 20 percent.
The brokerage identified two main downside risks for the company - a delay in opening new stores and greater competition from regional players looking to premiumize.
Metro Brands is a small-cap footwear stock with a market capitalization of ₹23,749 crore. The company made its stock market debut on December 22, 2021.
At current levels, the stock is trading 74.8 percent above its issue price of ₹500. In the month following its listing, the stock rose 22 percent to ₹610 levels.
As of March 31, 2021, Metro Brands operated 720 stores in 160 cities across 30 Indian states and union territories, its website shows.
The promoters own 74.3 percent of the shares in the company, while foreign portfolio investors and domestic institutional investors each own 3.3 percent and 4.7 percent, respectively. Regular shareholders own 17.7 percent, Trendlyne data showed.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
