Reduce Bata India; target of Rs 1500: HDFC Securities

HDFC Securities' research report on Bata India

Revenue grew 1.6% YoY (four-year CAGR: 2.1%; INR9.58bn vs HSIE: INR10.56bn). Revenue growth remains subdued despite (1) the early launch of the end-of-season sale (EOSS), (2) an 11% YoY increase in the number of retail points, and (3) Floatz (Sneaker brand) registering good traction. This implies that core product sales are declining. We expect SSSG to be meaningfully in the negative. GM/EBIDTAM contracted 186/95bps YoY to 54.7/25% (HSIE: 55.5/25%).

Outlook

We suspect the rising skew of distribution/online sales may have played a role, along with the early onset of EOS sales. While we remain watchful of how Bata treads the growth-margin equation across its volume drivers; we’ve cut our FY24/25 EBITDA estimates by 5-7% (to account for lower growth and margins) and downgrade Bata to a REDUCE rating with a DCFbased TP of INR1,500/sh, implying 25/Sep-25 EV/EBITDA/35x Sep-25 P/E.