Buy This Footwear Stock Target Price of Rs 2365: Edelweiss
Bata India Stock Outlook
The current market price for the stock is Rs.1616 per share, with a 52-week peak of Rs 2261 and an average 52-week low of 1608 per share. The company’s market capitalization is 24,635 crores. According to Edelweiss the most recent research, should investors purchase the stock at the current price on the market it is likely to increase to reach $2365 per piece. The stock has yielded a 182% return over 5 years, 30 percent in 3 years, and 9% in one year.
Sneakers and casuals continue to fuel the growth
BATA is witnessing a huge demand for trendy functional, stylish, and comfortable shoes. In the end, BATA kept its focus on the sneaker and casual clothing segment and put money into advertising campaigns to boost sales. BATA opened 18 sneaker studios in this quarter, bringing the total number to 125. The sneaker category is now contributing 19% of the overall revenue, which is about 4 percent more than the pre-COVID-19 period. BATA will be focusing its efforts on a variety of avenues to expand the sneakers market, such as the creation of collections as well as marketing and rolling outs across multiple stores.
The focus is on store and distribution expansion
BATA is continuing to grow its presence with new franchisee stores as well as Multi-brand stores (MBOs). The company opened more than 20 newly-opened franchise stores (EBOs) during the quarter increasing the number to 323 and aiming to have 500 stores in the next two years. BATA’s MBO coverage is now at 30,000 outlets spread across 1,100 towns.
BATA’s efforts to expand its distribution to smaller towns have resulted in gains in market share from non-organized players. BATA is also working on a plan to renovate stores to improve customer satisfaction and has renovated 64 stores in the quarter.
EBITDA and the PAT Bata India
Gross margin decreased by 97bps from QoQ to 57% as a result of the impact of RM cost inflation and a negative mix of products. Yet, EBITDA grew by 51 percent in QoQ to reach INR245cr. driven by increased revenues, and an EBITDA margin growth from 157bps to 26% as a result of reductions in spending by employees. PAT was up by 90% QoQ, to INR119cr (6 percent higher than our estimates).
Valuation
As per Edelweiss, “Though BATA’s ASP increased by 19% year-on-year (reflecting the increase in prices as a result of GST rate increases and reduction from RM inflation) However, the volumes are slightly lower than to pre-pandemic numbers. We believe that the company’s focus should be on casual, formal, and fitness footwear, in conjunction with an expansion of distribution, which could assist the company in recovering lost sales in the near.”
“Similarly BATA’s margins remain at 90 percent of pre-pandemic levels, because of the increased marketing expenditures in the last quarter. We expect BATA’s margins to increase gradually, and to get back to the pre-pandemic level by FY24E. We have reaffirmed our “BUY” rating for BATA with the TP of INR2,365/share which is 53x the FY24E profits.”
About Bata India
Bata India is the largest retailer and largest producer of sneakers across India and is a member of the Bata Shoe Organization. It was founded in 1931 as Bata Shoe Company Private Limited 1931, the firm was initially established as a modest operation within Konnagar (near Calcutta) in 1932. In January 1934, the foundation stone was laid for the first structure of Bata’s operations was laid. It is later renamed the Bata. In the years following the entire site was enlarged by a third. This township is known as Batanagar. It was the first factory in the Indian shoe industry to be awarded ISO: 9001 certifications. ISO: 9001 certifications.
Disclaimer
The stocks mentioned above were culled from the broker report of Edelweiss Broking Ltd. When investing in equity, there is the risk of financial loss. Investors should therefore exercise cautiousness.
