Jhunjhunwala’s Rs 5,000 crore stock pick gets GST-led target upgrade

Rekha Jhunjhunwala’s Rs 5,000 crore bet Metro Brands got target upgrades on Friday, with analysts citing GST cuts and new launches as demand drivers. With 40 per cent of its sales coming from footwear priced below Rs 2,500 per pair, the reduction of GST to 5 per cent is expected to boost volumes. 

"Assuming demand elasticity of 0.8 times and pass-on of the entire benefit to consumers, we see scope of 3 per cent increase in topline and an operating leverage-driven benefit of 7 per cent in Ebitda," Emkay Global said. 

This brokerage reiterated its 'Buy' on Metro Brands, while revising up its target price by 14 per cent to Rs 1,475, led by upward revision in earnings estimates and also earnings rollover. 

The Jhunjhunwala family held 14.37 per cent stake in Metro Brands as of June 30, which is valued roughly at Rs 5,000 crore at Monday's intraday price of Rs 1,280.10 apiece.

IIFL Securities said  tie-ups with global brands such as New Era (caps & headwear), Clarks (British footwear brand) and opening of the first Foot Locker store in India have solidified Metro Brands’ status as a partner of choice for global brands. 

"Amid tepid times for consumption, Metro's revenue CAGR of 8.6 per cent over FY23-25 is significantly ahead of peers. Despite subpar growth, Metro Brands' free cash flow generation was healthy in FY25 and ROIC stable. We upgrade our EPS estimates by 3-5 per cent factoring in the recent GST cut and reiterate Buy rating with a target price of Rs 1,375," IIFL Securities said.

Emkay Global said that its estimates factor in margin gains, helped by operating leverage on Metro’s recent tech/team investments and the margin turnaround in FILA. "The recent Metro Crossover launch is a perfect match for evolving consumer preferences; new format ‘Shoe Depot’ should also help cater to the discount-seeking consumer better. Metro’s healthy balance sheet (40 per cent cash) makes it a go-to-partner for incoming global brands, and further portfolio augmentation remains a potential upside," it said.