Reduce Bata India; target of Rs 1500 HDFC Securities

HDFC Securities' research report on Bata India

Bata’s premiumisation-volume trade-off strategy proved suboptimal vis-a-vis peers over FY15-23 (lost 10pp+ market share over FY15-23; ~13/16% FY23 revenue/EBITDA share). While our initial thesis on Bata’s difficulty in winning volumes played out (highlighted in our footwear thematic dated Dec-21; Link), we interacted with management (Bata India CFO Mr Anil Somani) to understand if Bata has a volume fix up its sleeve. Key takeaways from the interaction: the focus is on (1) continuing to improve price and product range across channels; (2) improving distributor and franchisee unit economics; and (3) making the cost structures variable (to a point).

Outlook

While we maintain our REDUCE rating with an unchanged DCF-based TP of INR1,500/sh (implying 35x Sep-25 P/E), we are waiting for execution on the above initiatives before we can get more constructive on the name.