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Prabhudas Lilladher initiates coverage on Metro Brands
Company Initiation – Walking on the right path
Metro Brands (METROBRA IN) – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd
Mumbai Sept 29, 2023: Prabhudas Lilladher have initiated coverage on Metro Brands (METROBRA IN) with ‘Accumulate’ rating and DCF based TP of Rs1231 (48.7x FY26E). MBL has created a pure retailing model in footwear with 766 stores across segments, price points and geographies with brands like Metro, Mochi, Walkaway, Crocs and Fitflop.
Amnish Aggarwal believe there is a huge runway for growth given
1. Presence in just 174 cities (Bata/ Tanishq 388/257)
2. Rising online salience (8% of sales, 32% CAGR)
3. Focus on mid premium segment (15ppt higher sales share of products with MRP>3000 since2020)
4. New brands licenses/acquisitions (Crocs, FILA, Fitflop, Birkenstock, Cheemo).
MBL has acquired FILA license for India and plans to scale this up like it has done with Crocs in the past. Post re-launch FILA will add another dimension to company’s growth prospects, although it will drag the performance in FY24 (Rs278mn loss in 4Q23/1Q24).
Investment Arguments
MBL has done better than peers post covid, being a pure footwear retailer specializing in mid to premium segment.
1. 1094 stores by FY26- MBL has guided for 200 net store addition across formats in FY24 and FY25, excluding FILA. We are factoring in 355 store addition over FY23-26 including FILA (51 stores by FY26).
2. Sales/stores to grow by 1.3% in FY24; 6% CAGR thereafter – MBL’s sales/store increased from Rs26mn/store in FY19 to Rs31mn/store in FY23. We estimate volume CAGR at 14.7% and increase in ASP from Rs1450 to Rs1609. We estimate 1.3% increase in sales/store in FY24, but 6.2% CAGR post that.
3. Sales CAGR at 20.1%; PAT CAGR 18.7% over FY23-26E – We estimate 20.1% Sales CAGR led by 19% sales CAGR in offline sales and 32% CAGR in online sales over FY23-26E. Margins are expected to stabilize post FY24 as losses of CBL will peak out.
4. Profit to bounce back post FY24 - MBL reported 18.6% growth in PBT from operations during FY19-23. We estimate 4.7% growth in FY24, but 17% CAGR in subsequent years.
