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Metro Brands, one of the largest footwear firms in India, has risen by more than 10% in the last week's trading session despite ending in red on Friday. The shares have defied the volatile markets and maintained a promising upside ahead. Metro Brands is a strong player in footwear with the right mix of brands. The company's shares have given significant returns to investors since its market debut in December last year. And due to its potential going forward, experts are optimistic about Metro Brands. If shares of Metro Brands will make strong gains then one investor is set to reap the benefits. It would be none other than the 'Warren Buffet of India', Rakesh Jhunjhunwala whose third-largest investment is in Metro Brands after Titan and Star Health in terms of value.

On BSE, the Metro Brands shares closed at 578.95 apiece down by 1.6% on Friday.  At the closing price, the company's market cap stood at 15,718.92 crore. However, it records a double-digit upside on a weekly basis. 

As per BSE data, the shares climbed by more than 10% in the last five trading sessions. It stood at 525.05 apiece on May 27.

Further, the shares climbed by nearly 28% so far in 2022. The shares stood at 453.7 apiece on January 3, 2022.

While since its debut on December 22 last year, the shares have risen by over 17% on BSE.

ICICI Securities Research Analysts Manoj Menon, Aniket Sethi, and Karan Bhuwania in their research note said, "Metro Brands, one of the largest Indian footwear speciality retailers present in India, has a right mix of brands (three umbrella brands + two EBO tie-ups) providing growth runway (of store addition). Its focus on financial discipline along with balance sheet strength provides confidence on the execution. It has an optimized mix of in-house brands and third-party brands in MBOs (Metro, Mochi and Walkway) to drive customer footfalls, improve sales density and gross margins. Besides, a platform of choice for international brands aids confidence on new avenues (of growth)."

Metro Brands has a portfolio of 624 stores as of March 2022. The company is planning to add 260 stores in the next three years.

The analysts said, " We believe the runway of store expansion is good given (1) The brands already have a national presence, (2) able to achieve penetration in lower-tier cities, and (3) have a balanced mix of men and women customers. It is targeting growth in all three segments of the market – economy, mid, and premium. Metro retails footwear under own brands of Metro, Mochi Walkway, Da Vinchi and J. Fontini, as well as certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop, which complement in-house brands."

On e-commerce and other opportunities, the analysts said, "given the underlying trend of e-commerce adoption in footwear space, Metro Brands has ramped up capabilities (8% contribution), with separate platforms for its three umbrella brands. Besides, it is also ramping up its digital presence (consumer connect)."

Among the key strengths of Metro Brands, the analysts highlighted that (1) Asset light business (outsourced manufacturing) with an efficient business model, (2) Financial discipline led by focus on unit economics, (3) (Potential) platform of choice for third party brands, (4) Strong portfolio of umbrella brands with in-house (brand) contribution of 70% in these stores, and (5) Strong promoter background and management team.

Talking about the valuation and risks, the analysts said "We model revenue / EBIDTA / PAT CAGR of 30% / 28% / 31% over FY22-24E. Initiate at BUY with a DCF-based target price of Rs700. Key risks are (1) delay in-store addition and (2) likely increased competition from regional players trying to premiumise."

As of March 2022, Rakesh Jhunjhunwala holds 14.4% or 39,153,600 equity shares in Metro Brands. He has invested in the company since December 2021, from his wife Rekha Jhunjhunwala's portfolio. He manages his and wife Rekha's portfolio.

As per Trendlyne data, Jhunjhunwala's shareholding in Metro Brands has valued around at 2,265.2 crore as of June 3, 2022.

Taking into consideration the June 3 closing price on NSE and ICICI Securities target price, the Metro Brands shares are set to rise by more than 20% ahead.

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