Bata India - Q2FY21 Result Update - ICICI Direct

Since lockdown relaxations, multiple measures undertaken by the company have led to a consistent increase in footfalls across its retail outlets and e-commerce platforms. However, sales continue to be materially below pre-Covid levels. For Q2FY21, Bata reported revenue de-growth of 49.0% YoY to Rs. 367.9 crore (vs. estimated de-growth of 51.8% YoY). Owing to unfavourable product mix, gross margins contracted sharply by ~600 bps YoY to 50.4%. Bata undertook rationalisation of fixed overheads with employee, other expenses down 7%, 31% YoY to Rs. 83 crore, Rs. 85 crore, respectively. Further, the company secured significant lease rental waivers leading to cost saving of Rs. 27.5 crore. Subsequently, Bata reported EBITDA of Rs. 18.1 crore vs. EBITDA loss of Rs. 86 crore in Q1FY21 . PBT losses narrowed down QoQ to Rs. 58.4 crore (Q1FY21: Rs. 135.0 crore), while net loss came in at Rs. 44.3 crore (Q1FY21: Rs. 101.3 crore). Though the recovery rate is gradually increasing on an MoM basis, we expect reinstatement to pre-Covid sales levels to take a couple of quarters.

Valuation & Outlook

Formal and fashion footwear demand is likely to remain muted in the near term due to fewer social gatherings. Unfavourable product mix (shift towards casual category) may lead to deterioration in gross margins in the near term. However, cost rationalisation initiatives will benefit the company over the longer term. Bata continues to have a healthy balance sheet having surplus cash of ~Rs. 800 crore as on H1FY21. We believe with its strong brand patronage and pan-India retail reach, the company should be able to revive its revenue growth trajectory as and when the impact of the pandemic is phased out. We reiterate HOLD recommendation on the stock with a revised target price of Rs. 1400 (38x FY23E EPS, previous TP: Rs. 1380).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Bata_Q2FY21.pdf

Shares of BATA INDIA LTD. was last trading in BSE at Rs.1355.5 as compared to the previous close of Rs. 1354.4. The total number of shares traded during the day was 10689 in over 1207 trades.

The stock hit an intraday high of Rs. 1367.45 and intraday low of 1351.1. The net turnover during the day was Rs. 14508852.

Source : Equity Bulls

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