Sharekhan's research report on Bata India
Bata India Limited’s (Bata) Q3 performance was affected by soft demand at the mass end of the footwear category, resulting in a 6% volume decline. Revenue and PAT grew by 7% and 15%, respectively (led by 285BPS to 22.9% improvement in EBIDTA margins). The impact of price hike due to increased GST rate is in the base. Bata expects sales volume to gradually improve in the mass end of the category. Sneakers, Floatz, Hush Puppies, and Comfit are growing at over 20%. EBIDTA margin will continue to improve because of softening key input prices, better revenue mix with premiumisation scaling fast, and reduction in freight cost. However, margin recovery to pre-Covid level will take time.
Outlook
The stock has corrected by 22% in the past year and trades at 38.5x and 31.6x its FY2024E and FY2025E earnings, respectively. Considering long-term growth prospects and limited downside risk, we maintain Buy with a revised PT of Rs. 1,775.
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