Shares of Rekha Jhunjhunwala-backed Metro Brands Ltd zoomed 5 percent in Friday's (September 29) trade after Prabhudas Lilladher initiated coverage on the stock with an 'Accumulate' rating, citing huge runway for growth given presence in fewer cities, rising online purchases, and acquisitions.

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The stock rallied 4.88 percent to scale a record high of Rs 1,138 apiece on the NSE today. At 3:08 pm, the scrip was trading 2.67 percent higher at Rs 1,117.20 per share. So far in 2023, Metro Brands shares surged 30 percent and rose 23 percent in the last one year.

The domestic brokerage firm has set a target price of Rs 1,231 and expects sales to grow at 20.1 percent compounded annually over FY23-26. It expects EBITDA and net profit to grow 19.3 percent and 18.7 percent compounded annually over FY23-26.

Prabhudas Lilladher said that Metro Brands 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.

"We believe there is a huge runway for growth given presence in just 174 cities, rising online salience, focus on mid premium segment and new brands licenses/acquisitions," it said in a note.

Metro Brands 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 the company’s growth prospects, although it will drag the performance in financial year 2023-24.

The company has done better than peers post Covid-19, being a pure footwear retailer specialising in the mid to premium segment, Prabhudas Lilladher said.

Metro Brands reported a 18.6 percent growth in profit before tax (PBT) from operations during FY19-23. The brokerage estimates a 4.7 percent growth in FY24, but a 17 percent CAGR in subsequent years.

Cash flows are expected to remain strong with stable return on equity and return on capital employed at 25 percent and 39 percent over medium term.

Rekha Rakesh Jhunjhunwala held a 9.60 percent stake, representing 2.61 crore equity shares, in the company as on June 2023.

First Published:Sept 29, 2023 3:40 PM IST