Target: ₹1,950
CMP: ₹1,705.35
Bata India (Bata) Q2-FY23 topline was in line with our estimates with revenue of ₹830 crore, registering a growth of 35 per cent y-o-y. Gross Margins improved to 55 per cent (up 209 bps y-o-y), but down 163 bps q-o-q on account of raw material inflation.
The company’s EBITDA margins remained flattish y-o-y at 19.4 per cent due to GM pressure and higher Opex, partly offset by cost rationalisation measures. EBITDA stood at ₹161 crore (23 per cent below our estimates) on account of higher operating expenses. Overall demand improved as schools, colleges and offices operated at pre-Covid levels, while Sneakers continue to lead the growth recovery.
Bata’s efforts on actualisation, consumer-relevant communication, and product availability along with driving channel expansion resulted in a consistent rise in footfalls across its retail outlets.
It has maintained healthy operating cashflows and EBITDA margins over the years, making it a capital-efficient business. We remain cautiously optimistic on the demand outlook going ahead and maintain Buy on the stock with a revised TP of ₹1,950/share. We discount some of its listed retail peers) as we expect Bata’s valuations to catch up going ahead.