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Indiabulls Ventures
Bata India (Buy)
CMP: ₹1,706.75
Target: ₹2,000
Bata India reported a very good set of 1QFY20 numbers on all counts on both quarterly as well as on a yearly basis. The top line of the company grew by 30 per cent q-o-q and 11 per cent y-o-y to ₹883 crore in 1QFY20 as against ₹798 crore in 1QFY19. EBITDA for the quarter grew by 154 per cent q-o-q and 84 per cent y-o-y to ₹243 crore in 1QFY20 as against ₹132 crore in 1QFY19. PAT for the quarter grew by 15 per cent q-o-q to ₹100 crore in 1QFY20 as against ₹82 crore in 1QFY19 and 87 crore in 4QFY19. EBITDA margin increased by 1,348 bps q-o-q to 27.52 per cent as against 14.04 per cent in 4QFY19.
Valuation: Bata India is one of the best stocks to play on India’s strong consumption story. Due to its good product mix, we feel Bata India will continue to report 15 per cent CAGR on a top-line over the next two years from FY20-21E. On account of its track record of maintaining stable performance and the introduction of various new product launches, the stock is trading at 38x FY21E PE. We would like to allot a PE multiple of 45x on an FY20E basis to bring it to a target price of ₹2,000.
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