Hedging of Metro Brands shares, target price of shares held by Rakesh Jhunjhunwala Ambit Capital
Rakesh Jhunjhunwala-backed Metro Brands’ share price is expected to rise nearly 33% from current levels, according to Ambit analysts who recently launched stock coverage.
Rakesh Jhunjhunwala-backed Metro Brands’ share price is expected to rise nearly 33% from current levels, according to Ambit analysts who recently launched stock coverage. Seeing Metro Brands’ peak throughput, superior store economics and rapid growth trajectory, Ambit placed a “Buy” call in the stock with a target price of Rs 718 per share. This is the second bullish outlook in favor of Metro Brands in recent weeks, as Axis Securities initiated coverage with a buy call. Rakesh Jhunjhunwala is a pre-IPO investor in Metro Brands.
Ambit analysts said Metro Brands is trading at 40x FY24 P/E versus 38x/69x for Bata/Relaxo despite better growth and a RoCE profile. Ambit said the growth opportunity for apparel and footwear retailers remains significant, with very few retailers having the right economic conditions leading to either high losses or slower growth. “Metro Brands is one of the few retailers in India to deliver profitable growth and generate free cash flow consistently for over a decade,” they added.
Ambit’s near-term growth estimates call for revenue CAGR of 14%/25% and EBITDA margin improvement of 510 bps/370 bps in fiscal years 20-25/22-25, leading to CAGR Overall EBITDA of 20%/32% and a PAT CAGR of 21%/32%. For Metro Brands to achieve this, Ambit is planning the massive addition of stores for the company. “We are building 824 Metro+Mochi stores, 467 Crocs stores and 185 Walkway stores at the end of FY30. Based on our assumptions, MBL has a potential of 1,100 Metro/Mochi stores, 750 Crocs and 1,100 stores Walkway by FY30 spread across 175 cities,” they added.
Also Read: Jhunjhunwala-Backed Metro Brands Expected to Rise 20%, Brokerage Says ‘Buying’ on Strong Growth Potential
Metro Brands is one of the few brands that can boast about their growth, profitability and cash flow. The company outperformed Bata on 3-year/5-year/10-year and Relaxo on 5-year/10-year revenue CAGR. In terms of profitability, it has consistently beaten its peers and generated FCF in 10 of the past 12 years.
Currently, Metro Brands is trading at Rs 538 per share. Ambit has a one-year target price of Rs 647 per share on Metro while the two-year target price is set at Rs 718 each. “Increasing the pace of store expansion for Walkway, the ability to scale FitFlop EBOs significantly, and new tie-ups may drive further,” analysts said.
Earlier last week, Axis Securities pinned a target price of Rs 625 per share on Metro Brands.
According to the latest shareholding data available on the stock exchange, Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold a 14.43% stake in the company. The couple together own more than 3.91 million shares of the company. The value of Big Bull’s stake stands at over Rs 2,100 crore.
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