Hold Metro Brands; target of Rs 1109: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Metro Brands with a target price of Rs 1109 in its research report dated January 19, 2024.

January 19, 2024 / 22:23 IST

hold

live

bselive
nselive

Volume

Todays L/H

Prabhudas Lilladher's research report on Metro Brands

We cut our FY25/FY26 EPS estimates by 3.7/5.2% given 1) tepid demand environment 2) longer than expected time to finish old inventory and launch new range/stores in FILA with ramp up slower than earlier estimates and 3) increase in opex ahead of FILA/ Footlocker store launch. MBL continued to sustain operating parameters with 1) addition of 15 new cities in 9M24 (3 in Q3) 2) increase in online/ Omni channel salience to 10% of sales without aggressive discounting 3) 500bps higher share of sales with MRP >Rs3000 in in Q3 4) on tract to open 100 stores in FY24 with 87 store already opened in 9MFY24 (added 31 stores in Q3). While long term growth strategy is in place led by 1) geographical and store expansion 2) brands licenses/acquisitions (Crocs, Fitflop, Birkenstock) 3) re-launch and scale up in FILA/ footlocker from FY25/26. We believe store closures in FILA by 1Q25 will curtail losses from 2QFY25 (Rs150mn in 3Q24 (Rs430mn in 9mFY24) although losses might remain high in 4Q/1Q on high discounting and store closures.

Outlook

We expect 250 net store additions including FILA and 6.3% sales/store CAGR over FY24-FY26, however we expect this to decline by 4.2% in FY24. We estimate Sales/EBITDA/PAT CAGR of 20.3/21.5/26.1% for FY24-26E. Though FY24 is likely to remain depressed, hopes of FY25 recovery will help support valuations at 60.9xFY26. Retain ‘Hold with TP of Rs1109 (Rs1187).

For all recommendations report, click here