Buy Bata India; target of Rs 1870: Geojit

Geojit's research report on Bata India

Bata India Ltd. (BIL) is the largest retailer and leading manufacturer of footwear in India, with 2,150 retail store presence in 725 cities (Dec 2023). We upgrade our rating to BUY with a target price of Rs.1,870, considering the improvement in margins. Revenue declined by a 1.3%YoY in Q2FY24, partially impacted by the shift in the festive season and lower demand in the mass segment. BIL expects growth in both mass and premium segments, with premium portfolio growing 1.5x of overall growth. Gross margin improved by 300bps to 58% while EBITDA margin improved by 280bps to 22.2%, aided by improved channel mix, lower discount, and inventory management. BIL focuses on an asset light expansion strategy and targets ~500 franchisees by 2024, already opened 476 stores across 412 towns. BIL has recently signed comprehensive licensing & manufacturing agreement for globally renowned fashion brand ‘Nine West’ and has also forayed into apparel segment (Power brand), currently in 62 stores. Given its strong brand recall & reach, we believe, BIL can revive its revenue growth trajectory. We value BIL at 44x on FY26 EPS.

Outlook

The demand is expected to improve in the festive season and also aided by lower inflation. We believe, BIL has the capability to revive its revenue growth trajectory given its strong brand recall & distribution reach and strong balance sheet. BIL currently trades at 50x 1Yr Fwd P/E. Considering the improvement in margins, we upgrade our rating to BUY (from HOLD) with a target price of Rs. 1,870, valuing BIL at 44x on FY26E EPS.

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