Metro Brands' growth promises hit by stretched valuations, say analysts

HDFC Securities, in a note dated September 30, maintained its 'Sell' recommendation, due to expensive valuations at 55x estimated September 2027 P/E.

Metro Brands Ltd. (MBL), one of India’s leading footwear retailers, is at an interesting inflection point, according to analysts. Despite steady demand recovery, improving consumer sentiment following the recent Goods and Services Tax (GST) rate cut, and new growth avenues through its value-focused Walkway brand, analysts remain cautious on the stock. 

 

The reason, according to analysts, is that valuations have run too far ahead of fundamentals.

 

HDFC Securities, in a note dated September 30, maintained its ‘Sell’ recommendation on the Metro Brands stock, due to expensive valuations at 55x estimated September 2027 P/E. The brokerage set a revised discounted cash flow (DCF)-based target price of ₹1,050 per share, implying a multiple of 47x on the same forward earnings.

 

 

“MBL remains best-in-class in terms of growth and capital allocation choices (10-year revenue/Ebitda compound annual growth rate (CAGR) of 13 per cent/15 per cent with free cash flow/profit after tax (FCF/PAT) conversion of >100 per cent). However, stretched valuations (55x Sep-27 price to equity) keep us at bay. We largely maintain our FY27/28 estimates with a revised DCF-based target price of ₹1,050/share (implying 47x Sep-27 P/E),” said Jay Gandhi and Vedant Mulik of HDFC Securities.

Demand stabilisation aided by GST cuts

 

According to HDFC Securities’ channel checks, demand trends in the September quarter (Q2FY26) were stable, although the first half of the month witnessed a brief lull as consumers awaited the implementation of lower GST rates. 

 

Effective September 22, 2025, footwear priced below ₹2,500 now attracts just 5 per cent GST, down from the earlier 12 per cent (on products under ₹1,000) and 18 per cent (above ₹1,000).

 

This tax relief is major given that products under ₹2,500 contribute nearly 40 per cent of MBL’s sales. Analysts believe the GST savings will likely boost purchasing power, helping the company sustain its revenue growth momentum. The brokerage is penciling in a 17.9 per cent revenue compound annual growth rate (CAGR) for FY25-28, supported by management guidance of gross margins in the 55-57 per cent range and pre-Ind AS Ebitda margins of around 22 per cent.

 

“The GST reset is clearly a tailwind for the mid-priced category, which forms a big chunk of Metro’s portfolio,” analysts at HDFC Securities noted. “But the structural valuation gap versus peers leaves limited upside for investors.”  ALSO READ | Amara Raja: Analysts keep Buy on strong LAB, margin gains and lithium push

Walkway: The potential joker in the pack

 

Among MBL’s portfolio, Walkway, the company’s value-format chain, could emerge as a surprise growth driver, analysts said. Management has reintroduced sub-₹500 price points, making the offering more competitive against unorganised players that dominate nearly 70 per cent of India’s ₹1.5 trillion footwear market.

 

After stagnating at 70 stores for several years, Walkway has seen fresh expansion momentum. In Q1FY26 alone, four net new outlets were added, and HSIE expects around 25 stores annually through FY28.

 

“If Walkway cracks the value proposition and establishes sustainable unit economics, it could very well have its ‘Zudio moment,’” analysts wrote, referring to Trent’s successful affordable fashion chain.

 

Metro’s management, during its Q1FY26 call, also stressed upon the long-term potential of the format. The stated ambition for Walkway, at scale, is to generate 30 per cent return on capital employed (ROCE). Still, analysts caution that ‘execution is key’ to realising this vision.  ALSO READ | Gold vs Silver: Where to invest, how much and price targets?

Other Brands: Fila, Footlocker, Clarks

 

Elsewhere in MBL’s portfolio, brand dynamics are mixed. Inventory liquidation for Fila is complete, but FY26 will be focused on repositioning rather than aggressive expansion. Footlocker, too, is expected to see measured growth over FY26-27, with assortment issues likely to be resolved by Q4FY26.

 

Meanwhile, Clarks, acquired in June 2025, has already seen its merchandise rolled out in Metro and Mochi outlets. The first exclusive Clarks store is planned for H1FY27. Metro and Mochi, the company’s core brands, continue to post steady growth.

Metro Brands Outlook: Execution strength vs Valuation risks

 

On the operational front, MBL continues to deliver enviable metrics, a 10-year revenue/Ebitda CAGR of 13 per cent/15 per cent and free cash flow to PAT conversion of over 100 per cent. Analysts also expect revenue and Ebitda CAGR of ~18 per cent each between FY25 and FY28.

 

Yet the stock’s rich pricing overshadows these positives. “Metro has the right product-market fit and disciplined execution, but at 55x P/E, a lot of the future upside is already priced in,” analysts highlighted.

 

While Metro’s brands may keep expanding and Walkway holds long-term promise, analysts believe near-term gains look capped unless valuations cool down.