Buy Metro Brands Ltd for the Target Rs 924 by Prabhudas Liladhar Ltd
Festival season begins well, all eyes on sustenance
Metro’s revenue missed our estimates, impacted by the delayed festive season, while healthy GM drove the PAT beat. We remain cautious in the near term, given
1) muted store metrics, with sales/store up just 1.4% YoY in Q2
2) continued delays in newformat store openings and scalability amid supply constraints
3) persistent inflationary pressures might weigh on near-term demand despite a healthy festive season
4) limited margin expansion potential amid elevated OPEX.
However, LT growth drivers remain intact, supported by
1) expansion into new cities
2) healthy online/omni-channel contribution at ~14% of total sales, with 12% YoY growth in Q2
3) accelerated Walkway store openings (2 in 2Q27) targeting valueconscious consumers in Tier-2 cities. We see the key growth delta emerging from MetroActiv, Clarks, FILA and Foot Locker, driven by new EBO launches and an expanded product range.
We estimate 13% EPS CAGR over FY26–FY29 and value MBL at 45xSept28 EPS (DCF earlier) and arrive at TP of Rs924 (Rs964 earlier). Following the recent correction, downside appears limited as stock trades at 48.3x/42.2x FY28/FY29 EPS. MBL lacks near term triggers given that many of its new brands are in an elevated capex/opex mode. We expect the stock to remain range-bound in the near term. Retain Hold
Please refer disclaimer at Report
SEBI Registration number is INH000000933
