August 05, 2016 / 18:52 IST
Axis Direct's research report on Bata IndiaNet sales and EBITDA declined 1.5% and 1.6% (vs. consensus estimate of growth of 12.5% and23.2%), while higher other income led to 6.9% YoY growth in adj. PAT. Gross margin expanded 219 bps YoY to 50.1%, as the base was lower due to discounting-led inventory clearance. Staff and rental costs were flat YoY but higher other expenses (up 12% YoY) ate into the better gross margin leading to OPM being flat at 12.2%.
With macro improvement, we expect Bata to register sales and EPS CAGR of 12% and 22% over FY16-20 (OPM increasing from 11.2% in FY16 to 15.4% in FY20). Given the earnings disappointment, we reduce FY17/18 EPS by 11% and 13%. Maintain BUY with revised TP of Rs 625(based on fwd P/E of 30x) vs. Rs 650.er.
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