Ambit Capital has a ‘sell’ rating on the stock, with a price target of Rs 1,312. HDFC Securities sees it at Rs 1,400.
Wealth has ‘buy’ on the counter with a target of Rs 2,365. Dalal & Broacha Stock Broking said downside is limited and long-term investors should hold, as it finds the stock Rs 2,001 worthy. Centrum sees it at Rs1,944 while Nirmal Bang Institutional Equities at Rs 2,240.
On Monday, the scrip closed at Rs 1,855.05, down 3.22 per cent. It has delivered a flat return so far this year.
In an interview to ET NOW, Bata India CFO Vidhya Srinivasan said her company has seen demand uptick across multiple geographies. “I think that is certainly a good indicator,” she said.
“ASPs have increased as well mainly as a function of input cost increasing and also due to the GST tax rate change, which impacted us. We are also trying to look at how customers are responding to the increase in prices and are being cautious. We are trying to balance both,” she said.
India recently posted a 71.82 per cent rise in consolidated net profit at Rs 119.37 crore for the first quarter of FY23 as the shoemaker achieved the highest ever quarterly sales. Revenue from operations during the quarter stood at Rs 943.01 crore, up over three-fold from Rs 267.04 crore in the pandemic-hit corresponding quarter of FY22.
Sneakers now account for 19 per cent revenues. School shoes contribution was 9 per cent of revenues in the June quarter.
Edelweiss said Bata’s volumes are still a tad lower compared with pre-pandemic levels. It sees strong focus on formal, fitness and casual footwear, coupled with distribution expansion would help the company recoup lost volumes in the near term.
“Similarly, Bata’s margins are at 90 per cent of pre-pandemic levels on account of higher marketing spend during the quarter. We expect the company’s margins to gradually improve and reach pre-pandemic levels by FY24E,” it said while valuing the stock at 53 times FY24 earnings.
On a relative basis, said
Securities, Bata India continues to disappoint.
Bata India’s three-year sales CAGR, at 2 per cent, falls meaningfully short against immediate peer Metro’s 18 per cent. Ebitda margin missed estimate despite a gross margin beat as normalisation in cost of retailing outpaced sales recovery, it said.
“The growth-margin equation across Bata’s volume drivers is likely to be tough to execute,” it said while assigning a valuation of 38 times June FY24 EPS.
Nirmal Bang said the thrust on the sneaker segment is probably the first big strategic initiative under the new CEO, Gunjan Shah, where it believes Bata is attempting to take the battle to the Global MNC players with its portfolio of nine brands at mid-tending-to-premium pricing.
“The thrust is to avoid head-on competition with them by not focusing so much on high-performance products, but for other aspects, including comfort, lifestyle, walking/running etc. From a contribution of 20 per cent to sales, the sneaker segment will go possibly to 50 per cent in the medium term without losing sight of other products in its portfolio,” it said.
The brokerage however has cut its revenue and Ebitda estimates for FY23-FY24 and values it at 46 times September FY24 EPS.
Centrum feels Bata’s growth, like in the past, will be largely led by increase in ASP. This brokerage believes Bata’s positioning in the sneakers category is relatively weak and, hence, may face headwinds as it tries and scales up.
Centrum noted that Bata’s sales volumes rose 19 per cent in FY22 to 38 million pieces YoY. But they were still 23 per cent below the FY20 volume. School shoes (9 per cent of sales) and office footwear volumes would not have gone back to pre-pandemic levels as per our estimates, it said.
“As highlighted by the management, low priced SKUs are still under pressure. Also, since the growth is led by franchisee stores, there will be a gap between volume and value growth. We estimate CAGR 2 per cent volume growth over FY20-24E,” it said.
An average target on the stock, as per Trendlyne, suggests a 12 per cent potential upside on the footwear maker.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)