Hold Bata India; target of Rs 1750: Sharekhan

Sharekhan's research report on Bata India

Bata India’s (Bata’s) Q1FY2024 performance was below-par with revenue growing by just 2% y-o-y; EBIDTA margins falling by 92 bps y-o-y to 25% and PAT declining by 10.2% y-o-y lagging ours as well as the street’s expectation. Revenue growth remained bleak due to slow expansion under the COCO strategy and continued underperformance by the mass segment. We expect toll on mass segment to continue for another quarter (till start of the festive season). Premium products are growing faster and providing support to overall growth. Further, the company is planning to expand base in small towns through the franchisee route.

Outlook

Stock has underperformed broader indices in the past one year and trades at 55.2x and 42.7x its FY2024E and FY2025E earnings. In view of muted earnings visibility in the near term, we downgrade our rating on the stock to Hold from Buy earlier with a revised PT of Rs. 1,750.