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HDFC Securities Institutional Equities
We recently interacted with Metro Brands Ltd.'s management. The focus remains on strengthening the value proposition across all brands. This is reflected in Metro Brands' best-in-class growth and capital allocation choices (10-year revenue/Ebitda compound annual growth rate of 14/18% with free cash flow/profit after tax conversion of ~80%.
That said, key performance indicators (sales density, margins) normalisation is likely to continue as-
Metro Brands faces tough comparables versus base (H1 FY23 comprised meaningful pent-up demand and more wedding days) and
the share of discounted sales gradually returns to pre-pandemic levels (7-9% from sub 5% in FY23).
The store addition guidance remains on track (100 stores in FY24). Our FY25/26 earnings per share estimates and target price of Rs 840 remain unchanged as valuation remains stretched.
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