ICICI Direct recommended hold rating on Bata India with a target price of Rs 1955 in its research report dated February 07, 2020.
ICICI Direct's research report on Bata India
Bata reported stable revenue growth of 6.5% YoY to Rs 830 crore despite a challenging market environment. Retail business grew 4% YoY while the wholesale business continued its strong performance with third consecutive quarter of 20%+ revenue growth. Gross margins continued their positive improvement trajectory and expanded 210 bps YoY to 60.7% owing to increased share of premium products. However, owing to negative operating leverage, EBITDA margins expanded 30 bps YoY to 21.3%. Absolute EBITDA grew 8.2% YoY to Rs 177.1 crore. Driven by steady operational performance and lower depreciation expense (down 6% YoY), PBT grew 11.4% YoY to Rs 177.7 crore. Effective tax rate came in higher at 33% vs. our estimate of 25.2%. Hence, PAT came in below our estimate at Rs 117.2 crore (I-direct estimate: Rs 133.1 crore), up 14% YoY.
We bake in revenue and PAT CAGR of 11% and 20%, respectively, in FY19-22E. We maintain our target price of Rs 1955 (44.0x FY22E EPS of Rs 44.4). However, we revise our rating from BUY to HOLD as the stock has appreciated by 33% over the last six months.
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