Metro Brands Ltd. share price target

Metro Brands (MBL) reported in-line 3Q results, with revenue growth recovering to ~11% YoY (vs. 5% YoY in 2Q), driven by a 43% YoY growth in Ecommerce sales. In-store sales grew ~8% YoY (vs. 5% YoY in 2Q), led by ~9% YoY area additions.

Metro’s Q3 results were largely inline – Revenue growth inched up to doubledigits (11%), aided by recovery in revenue per sqft (vs declining trend), ~9% network expansion, and faster ~37% growth in the e-com channel (~11% of sales). With EOSS and higher number of weddings, Metro expects to sustain the improving growth trajectory in Q4.

We initiate coverage on Metro with BUY and DCF based TP of Rs1,500 (implied target multiple of 70x Dec-26 EPS). Metro is the epitome of financial discipline, given long-term mid-teen revenue CAGR and consistent rewards to shareholders (~30% dividend payout).

Metro Brands’ (MBL) stock performance has been flattish in CY24 and has underperformed benchmark indices due to both internal and external factors. Internal factors included: a) the liquidation of old FILA inventory, which impacted gross margins, and b) a decline in revenue per sq. ft., driven by a lower share of Crocs in the incremental store rollouts.

Demand remains soft; expect pick-up in second half

Metro Brands (MBL)’s revenue grew 5% YoY (in line, -1% YoY in 1Q), driven by ~9% YoY area additions. Gross profit grew 2% YoY (3% miss) due to ~100bp impact of FILA inventory liquidation at higher discounts.

Demand remains soft; premiumisation drive continues

Metro’s revenue declined 1% YoY (9% miss), due to weak same-store sales (SSS); however, store additions supported revenue. A higher contribution of INR3,000+ ASP products and own-brand products boosted gross margins.

Metro’s reported adj. revenue grew 11% YoY (in line) in 4QFY24, led by
store adds. Productivity remained weak (-5% YoY) due to the high base;
however, the decline was moderate.

Premiumisation drive continues; FILA turnaround delayed

Normalisation quarter over high base; Q4 to follow the same course

Metro’s Q2FY24 revenue growth at 14% YoY was decent given the context of a high base and a shift in the festive season. Positives in the results were (1) continued thrust on retail expansion (at 28% YoY), (2) CBL’s integration tracking well with PAT loss contained similar to 1Q despite revenue headwinds (plans to focus on brand repositioning similar to China in FY25 and accelerate growth in FY26), (3) premium price point (> INR 3k) outperforms (~30% YoY).

Premiumisation drive continues; Fila to breakeven by FY25

On a steady growth track; store expansion continues