Bata India - Q1FY21 Result Update - ICICI Securities

Results for Q1FY21 were materially impacted due to; a) closure of stores for major period during quarter (~45 days), b) absence of school shoes sale (that forms significant part of Q1 revenues), c) nearly non-existent demand for formal, fashion footwear categories. Q1FY21 revenue fell 85% YoY to Rs. 135 crore (vs. estimated de-growth of 75% YoY). Post lockdown relaxations, stores re-opened gradually but operations were impacted owing to frequent lockdowns and restrictions mandated by local administrations. Bata undertook rationalisation of fixed overheads with employee & other expenses down 14% & 57% YoY to Rs. 85 crore & Rs. 56.0 crore, respectively. Further, it secured significant lease rental waivers (~50%) leading to cost saving of Rs. 50.1 crore. Despite a sharp reduction in operating overheads, EBITDA losses came in higher than our estimates owing to significant contraction in gross margins (down 1430 bps YoY to 40.4%). Subsequently, EBITDA loss came in at Rs. 86.1 crore (I-direct estimate: loss of Rs. 56.2 crore). Though ~85% of stores are currently operational, we expect reinstatement to pre-Covid sales levels to take a couple of quarters.

Valuation & Outlook

Demand revival for Bata is contingent upon traction during the festive season. Formal and fashion footwear demand is likely to remain muted in the near term due to fewer social gatherings. We expect demand recovery to be gradual. Bata has a debt free balance sheet with surplus cash at ~Rs. 960 crore and a capital efficient business model. We believe with its strong brand patronage and pan-India retail reach, Bata India should be able to revive its revenue growth trajectory as and when the impact of the Covid-19 is phased out. We reiterate HOLD recommendation on the stock with a revised target price of Rs. 1380 (40x FY22E EPS, previous TP: Rs. 1430).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Bata_Q1FY21.pdf

Shares of BATA INDIA LTD. was last trading in BSE at Rs.1231.5 as compared to the previous close of Rs. 1235.6. The total number of shares traded during the day was 50796 in over 4013 trades.

The stock hit an intraday high of Rs. 1249.9 and intraday low of 1226. The net turnover during the day was Rs. 62747866.

Source : Equity Bulls

Keywords