Bata India Ltd. share price target

We introduce FY24 Estimates but continue to maintain HOLD rating with a revised TP of Rs 1675/share (Rs 1500 earlier) given subdued discretionary demand due to extended lockdown. We roll forward our target PE multiple of 40x FY24E EPS.

Business recovery better than expected

Bata India witnessed a revenue recovery rate (adjusted) reaching 80% in Q4FY21 vs. 74% in Q3FY21. Lower revenues from formal & fashion footwear continued to impact gross margin YoY though QoQ gross margins witnessed an improvement. Revenue fell 5% YoY to | 589.9 crore in Q4FY21. Aligning with the current demand scenario, Bata tweaked its product portfolio from formals & fashion categories to casuals, fitness & essential categories. Gross margins contracted ~570 bps YoY to 53.1% mainly owing to unfavourable product mix. Cost control measures led to lower other...

Bata India's (Bata) Q4FY21 result was below our and consensus estimates on key parameters. After a strong recovery in Q3FY21, net sales growth took a pause amid weak demand. Net sales declined by 4.9% YoY to Rs5,899mn, while EBITDA came in at Rs1,121mn, down by 19.7% YoY. The company reported net profit of Rs295mn, lower by 23.2% YoY. Bata resumed its advertising and branding initiatives with a new ad campaign in Q4FY21. The company further strengthened its ecommerce and omnichannel facilities to cover more pin codes across India. It also continued expanding retail network in tier 3-5 towns via franchisee route by opening 10 new franchisee stores and appointing new distributors to serve multi-brand stores. Given second wave...

We trim our FY22/23E estimates given subdued discretionary demand due to extended lockdown in Q1FY22 and continue to maintain HOLD rating with a revised TP of Rs. 1500/share (Rs. 1600 earlier) we roll forward our target PE multiple of 45x to its FY23E EPS.

Slower-than-expected recovery drags financials

Volumes Picking Up Gradually, but We Expect Stress to Remain in FY22E: Recovery is clearly visible from the latest two quarterly numbers, with YoY revenues in Q2FY21 and Q3FY21 coming in at 51% and 74% of the numbers seen in the corresponding quarters in the previous year.

Q3FY21 revenue de-grew by ~26% YoY owing to Covid-19 led disruption, but on a sequential basis, growth was strong at +67% supported by festival demand and company's channel expansion initiatives. The overall volumes reached 88% of preCovid levels. Sales through digitally enabled platforms now contributes ~15% of total revenue (10% in Q2FY21). For strengthening E-commerce channel, BIL rolled out Bata ChatShop', Bata Home Delivery' & Bata Stores on Wheels'. To reach smaller towns, the company opens new stores via franchise route and ensures availability in multi-brand outlets via distribution channels. BIL opened 45 new franchise stores in the quarter taking the total franchisee to 221 and targets to open 500 in smaller towns...

Bata continues to penetrate newer towns through franchise operated stores (opened 45 stores taking total store count to 221 franchise stores). Some of the new towns include Itanagar, Varkala, Sivakasi, Pali and Ratnagiri (all having population between 50,000 and 3 lakh). It has reiterated its vision of opening 500 franchise stores by 2023 and reaching towns with population of less than 2 lakh. Furthermore, in a bid to strengthen its wholesale distribution channel (~12% of revenues), Bata has significantly ramped up its touch-points with Bata now servicing ~30,000 multi-branded outlets. This...

Bata India's (Bata) Q3FY21 result was a beat to our and consensus estimates on key parameters. Though quarterly performance was subdued compared to Q3FY20, the company's sequential net sales growth and EBITDA margin expansion was commendable given challenging business environment. Net sales declined by 25.9% YoY to Rs6,156mn, while EBITDA came in at Rs1,178mn, down by 55.3% YoY. The company reported net profit of Rs264mn, lower by 77.6% YoY. The management guided that healthy demand led by festive season resulted in strong volume growth in Q3FY21 and Bata's overall demand has reached 88% of pre-Covid level. To factor in beat,...