Neutral Bata India; target of Rs 1240: Motilal Oswal

Motilal Oswal's research report on Bata India

Bata India (BATA) delivered a modest growth recovery with 2% YoY revenue growth. The 10% miss on EBITDA was primarily driven by lower gross margin (-140bp YoY) on account of a shift in the channel mix (higher franchisee and e-commerce) and inventory clearance. Adj. PAT declined 19% YoY. Management indicated improvement in the demand environment in 2Q and expects further improvement in 2H with the onset of the festive season. However, the persistent softness, particularly in the mass segment (<INR1,000 ASP), remains a drag. BATA’s focus on premiumization (Hush Puppies, Power), steady network rollout, and a product revamp (including apparel and sneakers) could drive growth recovery and offset weak demand trends in the value category. We estimate a CAGR of 6%/8%/13% in revenue/EBITDA/Adj. PAT over FY24- 27. We reiterate our Neutral rating with a TP of INR1,240 (based on 40x Dec’26E EPS).

Outlook

We trim our revenue estimates by 1-3% and lower margins, which drives a 12%/21% cut in FY25/FY26 PAT estimates. We estimate a CAGR of 6%/8%/13% in revenue/EBITDA/Adj. PAT over FY24-27. We reiterate our Neutral rating with a TP of INR1,240 (based on 40x Dec’26E EPS).