Metro Brands: Chugging Along; Upgrade To Buy

Channel checks across the footwear space suggests that MBL remains among the few footwear retailers chugging along across KPIs. The inferences we drew across channel checks suggest (1) Q4 demand continues to stabilize toward base-line rates (15-17%); (2) < INR2,500 products (40% of sales) continue to witness improved traction post the Sep-25 GST cut; (3) Walkway’s progress post the reintroduction of <INR500 price points, step-up in store additions, and assortment improvement (esp. in home wear, slippers, proline shoes) remain impressive. Management too, in its Q1FY26 earnings call, highlighted that the ambition for Walkway (at scale) is to hit ~30% RoCE over medium-to-long term; however, execution is key. (4) Fila liquidation is done and remains in repositioning mode; however, Footlockers’ and its expansion is likely to be measured until Q2FY27, given BIS-related inventory constraints. Macro inputs (crude oil, LPG-related) have not impacted the industry supply chain yet (industry typically holds 2-3 months of inventory); however, prolonged macro-disruptions could pose inflationary risks on key input costs. MBL remains best-in-class in terms of growth and capital allocation choices (10-year revenue/EBITDA CAGR of 13/15% with FCF/PAT conversion of >100%). We upgrade the stock to BUY as risk-reward turns favorable post >25% stock price correction (since Sep-25). Our DCF-based TP remains unchanged at INR1,080/sh (implying 45x FY28 P/E). Estimates remain unchanged too.

Q4 demand continues to normalize YoY; not impacted yet by recent macro headwinds: Per channel checks, demand continues to move toward base-line rates (15-17%) as <INR 2,500 products (40% of sales) continue to gain traction post the Sep-25 GST cut. Recent macro-headwinds have not yet impacted the sales momentum. However, a prolonged disruption could impact supply chains. Note: The industry typically holds 2-3 months of inventory. We pencil in 20% CAGR over FY26-28 for MBL (on a low base). Long-term GM/Pre-IND AS EBITDAM guidance at 55-57/~22% stays (delivered GM/EBITDAM of 58/~21-22% in 9MFY26). Share of discounted sales is estimated to be stable at ~9% in Q4 (HSIE).

Walkway’s progress remains healthy: Walkway has seen a renewed focus from management both in terms of expansion plans as well as assortment. Management had reintroduced < INR500 price points in Q2/Q3 to make the format more penetrable and expansion has been spruced up too. Assortment across home-wear, slippers, etc. has improved meaningfully. Post a muted FY20-25 period where network remained stagnant at 70 stores, Walkway is likely to add 25-30 stores in FY26 (already added 21 stores in 9MFY26). We pencil in an average of ~30-35 stores over FY26-28. There could potentially be an upside risk here as the potential to scale such a value-focused format once the value proposition and unit economics are established is huge. Management too in its earnings call highlighted that the ambition for Walkway (at scale) is to hit ~30% RoCE over medium-to-long term; however, execution is key.

Brand-wise checks: Metro and Mochi continue to grow at a steady pace. FILA remains in repositioning mode and has commenced local manufacturing to mitigate BIS-related concerns. FY26 will be focused on brand repositioning and measured store expansion. Channel checks suggest that BIS registrations across international brands have increased. Footlocker should benefit from this. We expect assortment relevance issues to be resolved by Q2FY27 for Footlocker. Note: Footlocker and Fila store expansion is likely to remain measured in FY27 too. The Clarks (acquired in Jun 2025) merchandise has been launched within Metro and Mochi stores, while management plans to open its first EBO in H1FY27.

Valuation and outlook: MBL was always among the more disciplined footwear retailers with an in-sync product-market fit. However, post >25% stock price correction (since Sep-25), valuations are now more palatable (~38x FY28 P/E). We upgrade the stock to BUY with an unchanged DCF-based TP of INR1,080/sh (implying 45x FY28 P/E). Estimates remain unchanged too.

Source: HSIE Institutional Report March 17 2026