Hold Bata India; target of Rs 1400: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Bata India

Since lockdown relaxations, multiple measures undertaken by the company have led to a consistent increase in footfalls across its retail outlets and e-commerce platforms. However, sales continue to be materially below pre-Covid levels. For Q2FY21, Bata reported revenue de-growth of 49.0% YoY to Rs 367.9 crore (vs. estimated de-growth of 51.8% YoY). Owing to unfavourable product mix, gross margins contracted sharply by ~600 bps YoY to 50.4%. Bata undertook rationalisation of fixed overheads with employee, other expenses down 7%, 31% YoY to Rs 83 crore, Rs 85 crore, respectively. Further, the company secured significant lease rental waivers leading to cost saving of Rs 27.5 crore. Subsequently, Bata reported EBITDA of Rs 18.1 crore vs. EBITDA loss of Rs 86 crore in Q1FY21 PBT losses narrowed down QoQ to Rs 58.4 crore (Q1FY21: Rs 135.0 crore), while net loss came in at Rs 44.3 crore (Q1FY21: Rs 101.3 crore). Though the recovery rate is gradually increasing on an MoM basis, we expect reinstatement to pre-Covid sales levels to take a couple of quarters.

Outlook

Formal and fashion footwear demand is likely to remain muted in the near term due to fewer social gatherings. Unfavourable product mix (shift towards casual category) may lead to deterioration in gross margins in the near term. However, cost rationalisation initiatives will benefit the company over the longer term. Bata continues to have a healthy balance sheet having surplus cash of ~Rs 800 crore as on H1FY21. We believe with its strong brand patronage and pan-India retail reach, the company should be able to revive its revenue growth trajectory as and when the impact of the pandemic is phased out. We reiterate HOLD recommendation on the stock with a revised target price of Rs 1400 (38x FY23E EPS, previous TP: Rs 1380).

For all recommendations report, click here

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