Jhunjhunwala stock: Metro Brands shares climb 12%, take one-month gains to 20%

Shares of Rekha Jhunjhunwala-backed Metro Brands Ltd hit a record high in Tuesday's trade amid high volumes, taking its one-month rise to 20 per cent. While there is no particular reason for the stock to rise the Prabhudas Lilladher last week initiated coverage on the stock with a target of Rs 1,231. With Tuesday's high of Rs 1,270.05, the stock was well past that target price.

Prabhudas Lilladher said Metro Brands has a pure retailing model in footwear with a total of 766 stores across segments, price points. It cited its brands such as Mochi, Metro, Walkaway, Fitflop and Mochi and suggested a huge runway for growth for the company. It cited presence in just 174 cities against Bata's 388 and Tanishq's 257, rising online salience (8 per cent of sales, 32 per cent CAGR), focus on mid premium segment (15 percentage points higher sales share of products with MRP over Rs 3,000 since 2020) and new brands licenses/acquisitions such as Birkenstock, Cheemo, FILA, Crocs and Fitflop.

Prabhudas Lilladher said Metro Brands acquired FILA license for India and plans to scale this up like it has done with Crocs in the past. Post re-launch, it said, FILA would add another dimension to Metro's growth prospects, even as it may drag the performance in FY24, the brokerage said while suggesting an 'accumulate' rating on the stock.        

Jhunjhunwala cut stake in this company to 9.60 per cent in the June quarter from 14.40 per cent in the March quarter. She still owns Rs 3,250 crore worth Metro Brands shares.

The brokerage expect net store additions of 355 over FY23-26 (including FILA) and 6 per cent sales CAGR per store post FY24. It sees estimate sales growth of 20.1 per cent, Ebitda growth of 19.3 per cent and PAT growth of 18.7 per cent for FY23-26, compounded annually. While the brokerages sees FY24 to be a depressed year with PAT growth of 7.3 per cent, it sees 24.8 per cent profit CAGR over FY24-26. Metro Brands trades at 60.1 times FY25 EPS, which is at a premium to other footwear players, :given growth visibility and past track record," PL said.

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