Bata India Ltd. share price target

We trim our FY21E estimates and continue to maintain HOLD rating with a revised TP of Rs. 1600 (Rs. 1308 earlier) we roll forward our target PE multiple of 45x to its FY23E EPS.

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.

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's (Bata) Q2FY21 result was below our estimates on key parameters. Though net sales had a robust growth over Q1FY21, negative operating leverage weighed on EBITDA margin in Q2FY21. Net sales declined by 49% YoY to Rs3,679mn, while EBITDA came in at Rs182mn, down by 90% YoY. The company reported net loss of Rs443mn compared to net profit of Rs713mn in Q2FY20. The management guided that gradual opening up of all the stores and healthy demand in Tier-II and smaller towns led to higher sales volume. We believe Bata is well positioned to rebound to its earlier growth trajectory as metros and Tier-I cities are showing demand traction. We have cut our net sales/PAT...

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

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...

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.

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.

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