2 days Ago
Stock to buy in 2025: After witnessing a subdued 2024, Rekha Jhunjhunwala's portfolio stock Metro Brands could stage a turnaround. The stock is projected to deliver a 20 per cent return in 2025, according to a recent note by Motilal Oswal (MOSL), with robust growth potential, efficient execution, and superior store economics acting as potential drivers. Metro Brands Share Target Price MOSL has set a target price of ₹ 1,460 on Metro Brands stock, implying a 20.
46 per cent upside potential. As of the September 2024 quarter, Rekha Jhunjhunwala held a 14.4 per cent stake in Metro Brands, valued at ₹ 4,735 crore based on the current trading price of ₹ 1,211.
95 per share. Challenges in 2024 Metro Brands experienced a subdued performance in 2024 due to a combination of internal and external factors. Internal challenges included the liquidation of FILA inventory, which impacted gross margins, and resulted in lower revenue per square foot due to a reduced share of Crocs in new store rollouts.
Externally, weak discretionary spending and regulatory hurdles related to the Bureau of Indian Standards (BIS) weighed on the company’s performance. Despite these challenges, the company managed to maintain gross, EBITDA, and PAT margins at 57 per cent, 28 per cent, and 14 per cent, respectively, during H1FY25, reflecting its robust cost control measures. The stock's performance in 2024 was, however, volatile.
It rose during six months and declined in the remaining six. Over the past year, the stock lost 3.38 per cent, but from its 52-week low of ₹ 992.
65 in June 2024, it has risen 27 per cent. Currently, the stock is 12 per cent below its peak of ₹ 1,430.10, achieved in August 2024.
Key Investment Rationale MOSL highlighted its investment rationale as follows: MOSL emphasised the long-term growth opportunities from FILA and Foot Locker. While the launch of FILA exclusive brand outlets (EBOs) has been deferred to H2FY26 due to BIS challenges, these brands are expected to significantly contribute to Metro Brands' revenue in the medium term. Combined, FILA and Foot Locker could generate sales between ₹ 9,000 crore and ₹ 15,000 crore, equivalent to 38-63 per cent of Metro Brands' FY24 revenue.
As per the brokerage, Metro Brands' robust store economics—featuring sales per square foot (SPSF) of ₹ 20,000 and a two-year payback period—stand out in the competitive footwear sector. With the liquidation of FILA inventory largely completed and an increase in wedding days, MOSL anticipates an improvement in same-store sales growth (SSSG) and margins from H2FY25. With 873 stores across fewer than 200 cities, Metro Brands has ample room for expansion.
The company plans to deepen its footprint in existing markets and enter new cities, targeting a presence in 300 cities for its Metro and Mochi formats, stated MOSL. It further highlighted that the company is also refining the store economics of its value-focused Walkway brand to strengthen its presence in Tier-3 and smaller cities. Supported by a net cash balance sheet and operating cash flow of ₹ 13.
5 billion over FY24-27, Metro Brands is positioned to double its store count through internal accruals. MOSL’s Valuation Metrics MOSL values Metro Brands at 70 times its December 2026 P/E ratio, arriving at a target price of ₹ 1,460. The valuation incorporates a compound annual growth rate (CAGR) of 12 per cent in revenue and 13 per cent in EBITDA over FY25-FY50, driven by a 7 per cent CAGR in store additions and a 4 per cent annual increase in store sales throughput.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions..
