This footwear stock in Jhujhuwala's kitty is now up 158% over IPO price

Shares of Metro Brands that boasts of Metro, Mochi, Walkaway, Crocs and Fitflop brands, hit a record high of Rs 1,292, rallied 15% in intra-day trade on the BSE.

Shares of Metro Brands (MBL) hit a record high of Rs 1,292, as they rallied nearly 15 per cent on the BSE in Tuesday’s intra-day trade in otherwise a weak market on strong business outlook. In comparison, the S&P BSE Sensex had lost 0.57 per cent at 65,450 at 11:14 am.

The stock of the footwear company has surged 19 per cent in the past two trading days, and is up a huge 158 per cent when compared to its issue price of Rs 500 per share. The company made a stock market debut on December 22, 2021. It had listed below its issue price at Rs 436, and hit an all-time low of Rs 426 on its debut day.

MBL is engaged in trading of fashion footwear, bags and accessories operating in the premium and economy category and manufacturing of shoe care and foot care products.

As on June 30, 2024, Rekha Rakesh Jhunjhunwala, wife of the late ace investor Rakesh Jhunjhunwala, held 14.4 per cent stake in MBL. Rekha Jhunjhunwala is the second largest shareholders after the promoters, shareholding pattern data shows.

For June quarter (Q1FY24), MBL achieved an impressive increase in standalone EBITDA, reached Rs 194 crore. In the context of demand experienced last year, the Q1FY24 quarter witnessed going against pent-up demand post-Covid and a higher number of wedding days in the same period last year, MBL said.

The Company is focusing on premiumisation and digitisation to maximize revenue potential through all channels and strengthen its position in the market. Its expertise in brick and mortar and e-commerce retail, combination of superior store economics and strong runway of growth will allow it to garner rich valuations, MBL said in its FY23 annual report.

Going ahead, Metro Brands plans is to open 200 stores in the next two fiscals.

According to the brokerage firm Prabhudas Liladher, 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.

The brokerage firm believes there is a huge runway for growth given presence in just 174 cities (Bata/ Tanishq 388/257), rising online salience (8 per cent of sales, 32 per cent CAGR), focus on mid premium segment (15ppt higher sales share of products with MRP of over Rs 3,000 since2020) and 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 (Rs 27.8 crore loss in 4Q23/1Q24), the brokerage firm said in its initiates coverage report. The stock is trading above target price of Rs 1,231 per share.

According to analysts at HDFC Securities, Metro and Mochi will continue to grow at a steady pace. On FILA, the management highlighted that FY24 will be earmarked for inventory liquidation. FY25 will be focused on brand repositioning wherein fresh stock is introduced and discounts wear off coupled with measured store expansion. FY26 is likely to be the first year of scaling.

Unlike Cravatex (in its previous avatar) wherein the price straddled from Rs 1,500-8,000/pair, resulting in an unclear positioning in consumer minds, MBL intends to sharpen its price positioning (Rs4-7k/pair). However, the brokerage firm suspect A&P spending is likely to be elevated for FILA in the medium term, given that it will compete with strong incumbents. Q1 store additions were soft in Crocs, but it is likely a timing issue.