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Remains with in the growth and profitability guidance

* Metro Brands’ (MBL) revenue grew 15% YoY in 1QFY27, driven by demand recovery from mid-Jun'26, despite a muted Apr-May period due to weak consumer sentiment amid challenging the global backdrop.

* EBITDA growth was weak at 11% YoY (6% miss) as margin contracted 110bp YoY to 29.8%, due to higher investments in talent and brandbuilding and a slower ramp-up in new formats.

* MBL's growth trajectory remains within the guided range (15-18%), supported by store expansion, healthy demand across core formats, incubation of new banners and premiumization.

* Higher investments in brand-building, talent and incubating new formats weighed on margins; however, management expects profitability to remain within the guided range (~30% EBITDA and 13-15% PAT margin).

* We cut our FY27-28E EBITDA/PAT by 2-5% and model a 14-15% CAGR in revenue/pre-IND AS EBITDA/PAT over FY26-29E.

* We reiterate our BUY rating with a revised TP of INR1,200 (vs. INR1,250 earlier), premised on ~38x Sep’28E pre-IND AS EV/EBITDA (implies ~58x Sep’28E P/E).

Key takeaways from the management commentary

* Demand outlook: Apr-May’26 saw weak demand due to the impact of geopolitical uncertainties on consumer sentiment and the lack of weddings due to Adhikmaas. However, demand rebounded from mid-Jun'26.

* Long-term growth outlook: Improving customer traffic, conversion rates and new customer acquisition indicate that marketing initiatives are translating into healthy business momentum. While quarterly growth may be influenced by the timing of festivals and weddings, the long-term growth outlook remains intact.

* Margin outlook: Margin pressure during the quarter reflected in higher investments in brand marketing (~100bp), talent, technology and incubation of new store formats, along with lower treasury income. These investments are intended to support long-term growth. Management reiterated its guidance of maintaining gross margins of 55-57%, EBITDA margins of ~30% and PAT margins in the range of 13-15% for FY27.

* E-commerce: E-commerce growth during 1Q was adversely impacted by lower sales in SoR-led 3P channel, while brand website and marketplace reported strong performance.

* Clarks continues to exceed expectations, with encouraging customer response, minimal cannibalization and a localized manufacturing base strengthening confidence in a faster scale-up. Distribution is expected to expand to ~700 MBOs by FY27-end, with EBO rollout commencing from 3QFY27.

Valuation and view

* MBL's growth trajectory remains within the guided range (15-18%), supported by store expansion, healthy demand across core formats and premiumization.

* Higher investments in brand-building, talent and incubating new formats weighed on margins; however, management expects profitability to remain within the guided range (~30% EBITDA and 13-15% PAT margin).

* While BIS-related challenges persist for the S&A portfolio (Foot Locker, FILA and MetroActiv), MBL continues to diversify its growth drivers through rapid expansion of Walkway and strategic partnerships with Clarks and New Era, supporting sustained double-digit growth over the medium term.

* We remain positive on MBL's long-term outlook, supported by

(1) industryleading store productivity and disciplined cost controls

(2) strategic partnerships with global brands

(3) a long runway for growth across both core and emerging formats, funded largely through internal accruals.

* We cut our FY27-28E EBITDA/PAT by 2-5% and model a 14-15% CAGR in revenue/pre-IND AS EBITDA/PAT over FY26-29E.

* Reiterate our BUY rating with a revised TP of INR1,200 (earlier INR1,250), premised on ~38x Sep'28E Pre-Ind AS EV/EBITDA (implies ~58x Sep'28E P/E).

* Continued double-digit revenue growth and a successful scale-up of Clarks, MetroActiv, FILA and Foot Locker remain the key re-rating triggers.

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