Brokerage firm Motilal Oswal has kept a 'Buy' rating on Metro Brands with a target of ₹1,075. Despite a 12% moderation in revenue growth during the second quarter due to changing festive dates, the retailer boosted its EBITDA by 16% through better profit margins.
Brokerage firm Motilal Oswal has maintained its positive stance on Metro Brands, setting a price target of ₹1,075 per share. The report highlights a mix of results for the second quarter, noting that while revenue growth slowed to 12% compared to previous periods, the company showed strength in profitability.
The moderation in top-line growth is largely tied to a shift in festive dates. In the Indian retail sector, festival calendars can change from one quarter to another, which often alters consumer spending patterns and footfall. Because of this timing change, the year-on-year revenue growth did not match the double-digit pace seen previously.
Despite the slower revenue expansion, Metro Brands managed to grow its EBITDA by 16%. A key driver for this was a 215-basis-point improvement in gross margins. This efficiency gain was significant enough to help the company absorb rising costs, particularly higher minimum wage requirements that have been affecting operating expenses across the retail industry.
However, there are factors weighing on the bottom line. Net profit growth for the first half of the fiscal year was muted at 2%. This was caused by two main pressure points. First, rental costs have been rising, which creates a burden on profitability when store sales growth does not keep pace. Second, there was a decline in treasury income, or the interest earned on cash reserves, which reduced the overall profit.
Looking at valuations, the brokerage’s target price of ₹1,075 implies a valuation of approximately 53 times the projected earnings per share for December 2028. This high multiple reflects an expectation of long-term growth in the premium footwear segment. For investors, this means the current valuation assumes the company will continue to expand its footprint and manage costs effectively over the next few years.
The key monitorables for the stock in the coming quarters will be how well the company manages rental expenses and whether consumer demand rebounds strongly during the main festive season. Investors may also track if the current margin expansion can be sustained if wage and rental pressures continue.