Hold Bata India; target of Rs 1300: ICICI Direct
ICICI Direct recommended hold rating on Bata India with a target price of Rs 1300 in its research report dated February 13, 2019.
Feb 18, 2019 / 04:01 PM IST
ICICI Direct's research report on Bata India
Bata reported one of its best quarterly performances with a strong beat across all parameters. It reported robust revenue growth of 15.5% YoY Rs 778.7 crore (I-direct estimate: Rs 722.9 crore). This is the second consecutive quarter wherein Bata reported double digit revenue growth after 10 quarters. Sustained enhancement of product mix drove realisations (up ~13% YoY) with volume growth of 3%. Furthermore, SSSG grew 12% for the quarter Due to higher proportion of premiumised products (higher ASP) in the revenue mix, gross margins for the quarter improved significantly by 350 bps YoY to 58.6%. Furthermore, controlled operational cost structure and positive operating leverage led to significant expansion in EBITDA margins, up 450 bps YoY to 21.0% (highest ever EBITDA margin) Higher other income (up 28% YoY) further aided PAT growth. The resultant PAT grew 51% YoY to Rs 103.2 crore.
We model in revenue and PAT CAGR of 14% and 26%, respectively, in FY18-21E and expect RoCE to improve significantly by 660 bps to ~26% in FY21E. On account of the recent stock price appreciation (~20% since our last result update), it is currently quoting at ~35x P/E on FY21E EPS. Therefore, we have a HOLD rating on the stock with a revised target price of Rs 1300 (37.0x FY21 EPS of Rs 35.1).
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