Metro Brands - Worst Seems Over, Hold For Long-Term Gains: PL Capital

PL Capital Report

Metro Brands Ltd. saw muted Q1 amid lower wedding days and poor demand however worst seems over as-

1. Q2 is showing some green shoots across brands, despite heavy rains impact in some regions,

2. H2 FY25 is expected to show improvement in demand led by festive and marriage season and

3. relaunch of FILA & footlocker.

BIS benefits have not flown to domestic players due to higher costs and exemption given to smaller players. However, relaunch of FILA and footlocker stores might be delayed, amid addition of Vietnam & Thailand into non-certified countries. Long- term growth outlook remains intact led by-

1. geographical and store expansion (225 stores in two years) and

2. brands licenses/acquisitions (Crocs, Fitflop, Birkenstock, New Era Caps, and Footlocker).

We expect Metro to return to double digit profit before tax growth in FY25 and 18.6% compound annual growth rate over FY25-27.

Metro seems well placed among listed footwear players to ride India growth story, however valuations at 69.5 times-Sept26 will limit immediate upside.

We assign Hold rating (under review earlier) and recommend accumulating stock on dips for long-term gains.

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