December 01, 2016 / 13:24 IST
Bata India reported a disappointing set of Q2FY17 numbers wherein the results came in below our estimates on both revenue and profitability fronts. Revenues witnessed flattish growth of 1.5% YoY to Rs 583.4 crore, below our estimate of Rs 610 crore. High level of competition from MNCs as well as e-commerce players adversely impacted revenue growth.
H2FY17 is expected to be hit on account of demonetisation resulting in a decline in footfalls, consequently leading to a fall in revenues for FY17E. However, we anticipate the impact of the same will remain for a shorter term. Going forward, we expect a revival in sales growth from FY18E onwards. We believe the recent price correction may act as a good entry point considering the scope of enhanced profitability and improving return ratios. Hence, we upgrade our recommendation on Bata to BUY with a target price of Rs 462 (based on 27.0x FY19E EPS of Rs 17.1).
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