Stock of this footwear company has zoomed 101% from its listing day low

Shares of Metro Brands hit a new high of Rs 857, gaining 5 per cent on the BSE in Friday's intra-day trade, having surged 49 per cent in the past one month on the back of strong earnings in June quarter (Q1FY23). In comparison, the S&P BSE Sensex has rallied 10 per cent in the past one month.

The stock of the footwear company has zoomed 101 per cent from its listing day low of Rs 426.10, hit on December 22, 2021. Currently, it is 71 per cent higher against issue price of Rs 500 per share.

Rekha Jhunjhunwala, wife of ace investor Rakesh Jhunjhunwala, is the largest public shareholders in Metro Brands, with holdings of 14.43 per cent stake at the end of June 2022 quarter, the shareholding pattern data shows.

Metro Brands is one of the largest Indian footwear speciality retailers. It retails footwear under its own brands Metro, Mochi, Walkway, Da Vinchi and J. Fontini, and certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop.

In Q1FY23, Metro Brands reported a consolidated net profit of Rs 105.78 crore as against a net loss of Rs 12.13 crore in the quarter ended June 2021 (Q1FY22). Total revenue from operation rose 288 per cent year-on-year to Rs 517 crore from Rs 131 crore in a year ago quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin stood at 36.1 per cent in Q1FY23 as compared to 11.0 per cent in Q1FY22.

The company registered highest ever sales with strong sales performance across all its formats, regions / tiers & cities, product categories / gender & price points. The improved gross margin has been due to negligible contribution of discounted sales and improvement in overall sales mix in Q1FY23. In coming quarters, overall gross margins to normalize back to around ~ 55-56 per cent levels (average seen over last few years), Metro Brands said.

Metro has strongest brand equity in South and West India followed by North and East. Contribution from N&E combined has increased from 35 per cent to 37 per cent over FY20-Q1FY23.

"Similarly, Metro’s contribution from tier II/III towns has increased from 30 per cent to 32 per cent over the same period. This highlights that Metro is able to get similar traction in tier II towns despite having ASP of Rs 1500. Online & omni channel contributed ~8 per cent to the total sales," analysts at Centrum Broking said in a result update.

Entry into newer geographies, tie-up with international brands (Crocs and Fitflops) coupled with variable cost structure should help company to grow it sales/EBITDA/PAT CAGR at 34/36/47 per cent respectively over FY22-24E. On a low base we expect volume (no of pairs) to grow at CAGR 25 per cent and ASP at 7 per cent over FY22-24E, the brokerage firm said. However, the stock is above their target price of Rs 821 per share.