A changing business model - BATA in the process of re inventing itself: BATA over the last few years has focused on higher value products and re-inventing itself to cater to the younger and urban population with the aggressive addition of stores and the introduction of red collection and increased focus on women footwear.

A changing business model - BATA in the process of re inventing itself: BATA over the last few years has focused on higher value products and re-inventing itself to cater to the younger and urban population with the aggressive addition of stores and the introduction of red collection and increased focus on women footwear.

While living with the virus' was part of our earlier estimates, recent announcements on the vaccine front make us believe that near normalcy in demand could be achieved by 2HFY22, if not earlier. We therefore raise our Bata India (BIL) estimates across FY21-FY23, driven by (1) better-than-expected near term demand (2) likely return to normal consumer behaviour in FY22 and beyond. This would mean consumers buying more premium footwear (3) sustenance of some of the cost cutting initiatives of FY21, thereby improving margins. Our estimates are higher than consensus and we expect the street to get into an upward EPS revision cycle. We retain our Buy' rating with a target price (TP) of Rs1,658 (upside of 20%) at 42x target PE multiple on September'22 EPS. 42x...

We believe, BIL will be able to revive its revenue growth trajectory when the economy is back to normal. We value BIL at 42x on FY23 EPS. Gradual recovery led by channel expansion initiatives Q2FY21 revenue de-grew by ~49% YoY owing to Covid-19 led disruption, but the growth was robust on a sequential basis (+173% QoQ). Currently, all of the stores are open (Vs.85% in Q1FY21) and the company's channel expansion initiatives supported the growth. To generate demand in the current scenario, BIL has launched two new products to suit work at home. For strengthening E-commerce channel, the company...

Bata India posted 49% YoY degrowth in Q2FY21 revenue, in-line with our estimates.

We turn positive on the stock from a long term perspective given immense growth potential and revise our rating from SELL to HOLD with TP of Rs. 1,308 (earlier Rs.1,150/share) and continue to value it at a target multiple of 40x PE its FY23E EPS.

The management highlighted that smaller towns witnessed a faster recovery rate (~75% of pre-Covid levels) while Tier I cities (Bata's key markets) are picking up pace at a slower rate (~50% of pre-Covid sales). In a bid to strengthen its wholesale distribution channel (~12% of revenues), Bata has significantly ramped up its touch-points with the company now servicing ~30,000 multi-branded outlets (MBOs). This enables it to leverage its brand strength in Tier III-V towns. Apart from MBOs, Bata will continue penetrating in newer towns through franchise operated stores (opened 200th store in...

Valuation and Risks: Good brand recognition, market share and being amongst the very few companiesin the listed space in footwear, the company would continue to hold premiumvaluations.

Gross margin hit on negative operating leverage Bata India's (BIL) YoY 1QFY21 performance was weak with revenue at Rs1,351mn against our estimate of Rs2,205mn due to (1) stores remaining completely shut for almost half of the quarter and operating at significantly reduced capacity for the other half of the quarter (2) low footfalls (3) absence of sale of school shoes (3) shift of demand towards lower priced casual footwear and sportswear. Gross margin in 1QFY21 was down ~1400bps YoY at ~41%. This was entirely due to the loading of costs of manufacturing units, which were largely shut during the quarter. Had manufacturing operations been normal, gross margin would have been in line with last year at...

Bata's Q1FY21 was largely impacted by extended lockdowns across the country till the first week of May and significant disturbances during the remaining period led to the contraction of revenue and Gross Margins for Bata India. Revenue for Q1FY21 declined by 85% YoY to Rs 135 cr

Q1FY21 revenue de-grew sharply by ~85% YoY owing to lock-down in April & May, and nil production due to Covid-19 pandemic. Usually Q1 is the strongest quarter on account of high demand due to school openings. However, the schools are now closed due to lock-down. Despite gradual relaxation in lockdowns, prevailing uncertainties are impacting the discretionary demand. Currently BIL's ~85% stores are open and the company has achieved ~35-40% of the pre-Covid business levels as per management. To generate demand in the current scenario, BIL has launched two new products to suit work at home, strengthening E-commerce channel, rolled out two new...

We recommend a SELL on Bata India with a Target Price of Rs 1116 downside of 10% from CMP of Rs. 1240 and Stop Loss Rs 1302.

Bata generates ~50% of the revenues from premium category footwears (MRP> Rs 1000+) and largely operates through its wide retail network contributing ~84% to the revenues. We, Initiate coverage with SELL rating on the stock with a target price of Rs 1150 as we value the stock at 40x P/E on its FY23

Valuation and Risks:A cash rich and clean balance sheet, management with excellent track record and high brand recognition will help sustain valuations.

In view of the current situation, management stated that the company is expanding its e-commerce presence with enhancing online channels, allowing delivery in more than 1300 cities and rolling out home delivery. Additionally, the company is focused on several cost management efforts including rental negotiations, closure of unviable stores and thrust on digitization across the organization to boost...

Bata Indias (BIL) YoY 4QFY20 performance fell short with Revenue/EBITDA/PAT declining by ~9%/~32%/~50%, respectively against our estimates of a decline of 3%/~22%/~36% (pre-IndAS 116). A large part of the profitability miss was driven by the 6% miss on revenue and higher than expected employee cost and tax rate. BIL stated that it had grown revenue by ~8% in January and February before the collapse in March. From what we gather, had it not been for the Covid impact, revenue for the quarter would have grown in high single digits and EBITDA growth would have been in double digits. The latter would have been ahead of our pre-Covid expectations. In 4QFY20, we gather that retail part of the revenue declined by 11% in value terms (likely forming ~80%) and non-retail part grew by 8%. In the 4%...

Bata India posted a 8.6% degrowth in Q4FY20 revenue, 20.5% below our estimates

Covid-19 is expected to dramatically shift more customer traffic to digital channel. Bata has, over the past two years, focused on strengthening online presence by leveraging strong partnerships with e-commerce leaders like Myntra, Amazon & Flipkart as well as improving assortment on its own website. The company has rolled out a full suite of omni-channel solutions, allowing home delivery across 900+ stores (vs. 400 stores in FY19) in 1300 cites. Furthermore, it has provided customers an option to shop via WhatsApp chat with neighboured stores. Currently e-commerce contributes...

Though significant negative impact is expected on sales; costs like rent, other operation related costs would not decline in the same proportion. Hence Bata would take abnormally longer time to restore...

Bata India (BIL): In 4QFY20, we expect BIL to report degrowth in sales/EBITDA/PAT by 3%/22%/36%, respectively, on YoY basis. The stock performance has been in line with Nifty at -29% in 4Q. Revenues are expected to take a hit given the economic slowdown and lockdown implemented by the Government from 22nd March. Marriages and social events are expected to get postponed/scaled down, which will further impact 1HFY21 earnings. We believe 65-70% of costs are fixed in nature and expect that BIL will save on rentals during the lockdown as their rental agreements have a forced majeure clause. However, the outcome is still uncertain at present. BIL was earlier focused on increasing its marketing spend but going forward it is likely to cut down its...