Footwear stocks in focus: Metro Brands, Campus can gain 10%, charts show

Among individual stocks, Liberty Shoes has witnessed a 'Golden Cross' on the daily chart, and can potentially rally up to 15 per cent.

The Rs 96,000 crore Indian footwear market (FY20), according to experts, has witnessed a unique transformation over the last few years. India's young populace, they said, with high aspiration and having an improved fashion quotient is driving demand, especially for casual, athleisure, sneakers and women's footwear.

Over one-third of the market, according to analysts at Motilal Oswal Securities, is composed of high-end products, primarily catered by organized/branded players, where investment in exclusive brand stores (EBO) is the key. This market segment, Motilal Oswal Securities suggests, is growing at 1.5x the rate of overall market growth (15 per cent CAGR over FY15-20). The resulting heavy investment and execution challenge in EBO creates an entry barrier, which they believe is evident from a handful of large footwear brands in the industry.

"The quantity of growth is the determining factor for valuation. Clearly, Metro and Campus have delivered exceedingly well on the growth factor and have a far superior outlook. At P/E of 47x/65x, respectively on one-year forward (FY24E), however, the stocks appear rich, factoring in the potential growth over the next two years. Yet, we believe, the next 3-5 years growth in business does offer reasonable upside in the stock. Bata and Relaxo, on the other hand, are solid players with dominant positions but have seen moderate growth with rich valuations at P/E of 47x and 78x, respectively on one-year forward (FY24E)," they wrote in a recent report.

Meanwhile, here is what the technical charts suggest as regards the frontline players in this segment.

Campus Activewear Ltd (CAMPUS)

Likely target: Rs 650

Upside potential:  10%

Shares of Campus Activewear were riding higher levels without much of a struggle. The “Higher High, Higher Low” formation continues to foster bulls with a stronger upside. The trend is robust and as long as the stock holds Rs 520, the bullish sentiment shalll favour the stock into more uncharted territories. The chart texture points at Rs 650 as an immediate destination. CLICK HERE FOR THE CHART

Metro Brands Ltd (METROBRAND)

Likely target: Rs 970

Upside potential:  10%

Shares of Metro Brands, recently experienced selling pressure, after the stock had hit overbought category of the Relative Strength Index (RSI). The price action and momentum thereafter slowed down for the stock. Now post forming a base near the range of Rs 750 to Rs 720, the stock is ready to march afresh ahead. There is a RSI divergence on the daily chart, signalling price action alone dominates the bear assault. The trend is headed to a new historic peak of Rs 970 level.  CLICK HERE FOR THE CHART

Bata India Ltd (BATAINDIA)

Likely target: Rs 2,050

Upside potential:  8%

Bata India is struggling to sustain above the 200-day moving average (DMA), but the stock is reluctant to let pass the support. Further, the 100-DMA placed at Rs 1,820 provides another cushion for the strong sentiment. As and when the stock shall manage to overcome weakness around the 200-DMA, the upside bias can trigger a rally towards Rs 2,050 level, which is the next hurdle. CLICK HERE FOR THE CHART

Relaxo Footwears Ltd (RELAXO)

Likely target: Rs 1,200

Upside potential:  8%

With the 50-DMA establishing a positive convergence with the 100-DMA, the positive leap can lead to a move towards the 200-DMA hurdle set at Rs 1,111. As and when the stock conquers the barrier of 200-DMA, the breakout could rally could lead the stock towards Rs 1,200 level in quick succession, shows the daily chart. CLICK HERE FOR THE CHART

Liberty Shoes Ltd (LIBERTSHOE)

Likely target: Rs 220

Upside potential:  15%

The “Golden Cross” breakout on the daily chart underpins a positive rally to Rs 220. The trend is strong with a “Higher High, Higher Low” formation, and support for the stock is seen at Rs 183 and Rs 174 levels. The volumes have risen significantly during breakout, pointing at the greater interest of market participants.  CLICK HERE FOR THE CHART