Bata

06 Jun

Aims to reach Revenue of Rs 50,000 mn by FY25E: Bata India

 

Update on the Indian Equity Market:

On Monday, the Nifty failed to close in the green, despite recovering much of its intraday losses. Nifty closed at 16,530 (-0.1%). METAL (+1.1%), OIL & GAS (+0.6%), and PRIVATE BANKS (+0.2%) were the top sectoral gainers. MEDIA (-1.3%), REALTY (-0.8%), and CONSUMER DURABLES(-0.6%) were top losing sectors.

The top losers were SHREECEM (-3.1%), BPCL (-2.6%), and ASIANPAINT (-2.5%) while BAJAJAUTO (+4.0%), JSWSTEEL (+2.7%), and TATACONSUM (+1.7%) were the top gainers.

 Aims to reach Revenue of Rs 50,000 mn by FY25E: Bata India

Edited excerpts of an interview with Mr. Gunjan Shah, MD & CEO, Bata India with ET NOW on 2nd June 2022:

  • 4QFY22 has been a robust quarter for Bata. Revenue grew by 13% YoY and EBITDA grew by 45% on the back of price hikes and improved product mix.
  • When asked why the volume growth has been weak, are these metrics likely to continue, the CEO replied that the company has proactively worked towards margin expansion through different levers:
    • First, improving the product mix. The movement towards casualization and sneakerization has aided the effort. In 4QFY22, sneakers contributed ~20% of the total revenue.
    • Second, bringing cost efficiencies in different operations.
    • Third, price hikes.
  • Short-term bounce back has been seen in the market. There is a normalization of consumer behavior after distortion of almost 2 years. Reopening of schools and offices and marriage season is pushing the fashion and formal footwear sales.
  • Longer-term trends lie in “sneaker-isation” and “casualisation’ as people now want to take comfort out of home as well. Bata is making sure that its portfolio is in line with these trends and has been backed by the latest launched campaign of 24/7 casual collection along with Brand Ambassador Disha Patani.
  • Bata aspires to reach Rs 50,000 mn revenue by FY25E with the help of the following levers:
    • Ensuring portfolio in line with the faster-growing categories (Sneakerization),
    • Footprints expansion through deeper penetration into the Tier 3&4 cities to tap the rural and middle India which is ramping up at a faster pace,
    • Digital Footprint expansion, and
    • Keep looking into the inorganic opportunities.
  • Bata delivered ~24% EBITDAM in 4QFY22. Management commented that they are just nearing the pre covid levels and have worked on cost efficiencies to aid margin expansion and will try to keep the margins stable.
  • The company is looking to increase the market share in smaller towns aggressively by adding new stores. It expects consumer preference to shift from an unorganized market to an organized market.
  • The promoters sold ~2.8% stake in the company through a block deal on 1st Jun 2022 on which the CEO commented that it doesn’t impact the majority control the promoter has over the operations. It was a minor dilution which was in line with the restructuring of the family trust.

Asset Multiplier Comments

  • We think Bata is striking the right chord to bring in revenue growth. Strong market leadership, the revival of formal footwear along with strong growth in casual portfolio and various distribution initiatives would help the company reach rich dividends.
  • Continuous focus on cost savings across rentals & operations, manufacturing and driving efficiencies in its value chain, and improving product mix will aid margin expansion.

Consensus Estimate (Source: market screener website)

  • The closing price of Bata India was ₹ 1,829/- as of 06-June-2022. It traded at 54x/44x the consensus EPS estimate of ₹34.2/41.9 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,980/- implies a PE multiple of 47x on the FY24E EPS estimate of ₹ 41.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

 

 

 

 

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10 Nov

Demand recovery expected to continue – Bata India

Update on the Indian Equity Market:

On Wednesday, Indian benchmarks declined for the second consecutive session with NIFTY closing at 18,017 (-0.2%). Among the sectoral indices, OIL & GAS (+0.8%), AUTO (+0.5%), and PHARMA (+0.2%) were the only gainers. PSU BANK (-2.4%), METAL (-1.8%), and REALTY (-1.4%) led the laggards. Among the stocks, UPL (+3.4%), BHARTIARTL (+3.3%), and M&M (+3.0%) led the gainers, while HINDALCO (-3.4%), INDUSINDBK (-3.3%), and TATASTEEL (-2.9%) led the laggards.

Excerpts of an interview with Mr. Gunjan Shah, CEO, Bata India (Bata) with CNBC-TV18 on 8th  November 2021:

  • Bata had a tough time the last 18 months due to the 2 lockdowns. With things opening up, the company is seeing some recovery.
  • In 2QFY22, the company has seen a MoM recovery. He believes that with more stores opening up, recovery is sustainable in the medium term in terms of consumer demand perspective.
  • The immediate priority is getting the company back to pre-pandemic performance levels. Going forward, the portfolio is in line with consumer demand, towards casuals and sneakers. The company is seeing initial progress in this direction but there is a long way to go in that segment.
  • To leverage the Bata brand equity, it is looking for a franchise model in tier 3-5 towns or through multi-brand outlets. The distribution expansion is one of the big areas they are working on.
  • They are also focusing on the digital footprint. The current omnichannel strategy contributed in teens to the revenue in 2QFY22 and the company wants to increase it.
  • The company has taken significant steps towards cost reduction during the pandemic. Some of these are expected to sustain. With business coming back to normal, the quantum of cost savings may not be similar as seen during the pandemic months.
  • Sneakers are used not just for sports but also for other occasions. There is a longer-term trend that consumers will prefer to the extent the comfortable footwear usage once lockdowns are lifted.
  • Casual ranges such as Power, North Star are seeing 40% growth in demand, and the company wants to improve that further. Bata has expanded its merchandise, in casual footwear and launched open footwear.
  • It is ensuring customers connect with the Bata merchandise. For this, they have piloted a big initiative, Sneaker Studio which ensures the entire sneaker range is displayed in a cohesive form in the stores. While this initiative is currently rolled out in major metros, the Company is expanding it in the next 12 months.
  • To conserve cash, Bata had reduced its ad spend during the pandemic period. With the demand recovery, it has started investing in ad campaigns.
  • The company will witness the highest ever addition in franchise stores in FY22. It sees strong penetration potential in Tier 3-5 towns, championed through the franchise model.
  • The next stage of expansion is planned through multi-brand outlets. The company’s coverage has increased from 450 towns to over 900 towns in the last 2 years. It plans to add another 500 towns in FY23 and expects a 20% contribution to the topline from multi-brand outlets.
  • Raw material inflation is witnessed especially in synthetics and plastics. About 25-30% of the portfolio has a significant amount of synthetics and plastics which go into it, where there is significant pricing pressure.
  • It is also focusing on the premiumization story, where realizations are better.

 

Asset Multiplier Comments

  • With Bata’s revenue recovery rate reaching 85% of pre-Covid levels in 2QFY22, we are confident of the company’s performance. We think Bata’s new strategies and focus on cost reduction, omni channel, change in product mix (higher proportion of casual footwear) and calibrated expansion of retail network through asset light franchisee route would aid in providing thrust to revenue growth.
  • We expect the company to benefit from market share gains on account of store expansion in lower-tier cities where the unorganized segment is dominant and who would face pressure on passing on RM inflation through price hikes.
  • We believe a strong balance sheet with healthy cash on books and efficient working capital should support Bata through these testing times.

Consensus Estimate (Source: market screener and investing.com websites)

  •  The closing price of Bata India was ₹ 2,182/- as of 10-November-21. It traded at 182x/ 61x/ 50x the consensus EPS estimate of ₹ 12/ 36/ 44 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,808/- implies a PE multiple of 41x on FY24E EPS of ₹ 44/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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23 Oct

Demand for casual wear is consistent – Bata India

Update on the Indian Equity Market:
On Thursday Nifty closed 0.35% lower at 11,896. Among the sectoral indices NIFTY Media (+0.7%), Metal (+0.7%), and Realty (+0.4%) closed higher. Pharma (-0.9%), IT (-0.7%), and Private Bank (-0.7%) closed lower. Hero Motocorp (-3.03%), Indusind Bank (-2.99%), and ICICI Bank (-1.62%) closed on a negative note. NTPC (+4.1%), Tata Motor (+3.1%), and Bharti Airtel (+2.9%) were among the top gainers.

Excerpts from an interview of Mr. Sandeep Kataria, CEO, Bata with CNBC-TV18 dated 20th October 2020:

● Speaking about demand, Mr. Kataria said things are much better as compared to the past 3-4 months.

● There is a pick up of demand MoM. The company expects to reach normal levels with the festive season coming in.
● Speaking about stores, he said almost all the stores are opened except a few isolated ones.

● People are getting back to the office. Delhi and Gurugram are the cities where traffic is visible.
● Demand for casual wear is consistent and washable slippers.

● Q1 was weak for the company as well as the industry. He expects that the company will reach pre-covid levels towards the end of the festive season.

● Speaking about stores, the company had negotiations with landlords which was helpful. The push of the franchise store in towns below 5 lakh population is showing a good trend and there are a lot of enquires.

● The biggest cost is rentals for the company and the company is taking measures to reduce it.

● The administration and travel costs are also looked closely.

● The company has a strong balance sheet and remain cash positive, there is no worry on that front.

● On post- covid scenario, he said the company is already working on E-commerce and the focus will continue.

● He said tier 2,3 towns are showing a quick bounce back as compared to urban.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Bata was ₹ 1,362 as of 22-October-2020. It traded at 182x/ 46x/ 38x the consensus Earnings per share estimate of ₹ 7.5/29.8/35.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Bata is ₹ 1293/- which implies a PE multiple of 36x on FY23E EPS of ₹35.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Oct

95% of stores have resumed operations – Bata India

Update on Indian equity market:
The optimism in markets continued as Nifty closed the holiday-shortened week at 11,415 (+1.5%). Among the index, INDUSINDBK (12.3%), BAJFINANCE (5.0%), and BAJAJAUTO (4.1%) were the top-performing stocks while DRREDDY (-1.4%), ITC (-0.5%) and ONGC (-0.5%) were the laggards. The optimism was such that all the sectors traded in the green zone on a weekly expiry day with PVT BANK (4.1%), BANK (3.6%), and MEDIA (3.1%) leading the rally.
Excerpts of an interview with Mr. Sandeep Kataria, CEO, Bata India (Bata) published on ETNOW dated 25th September 2020:
Mr. Kataria said the sales trends are changing after COVID-19. The Work-From-Home norm has affected the demand trends as the demand is moving towards comfort wear.
Footfalls are gradually increasing in the stores as the unlock is happening. 95% of the Bata stores have resumed operations.
Small towns with 1-3 lakh population are the fastest to return to pre-COVID levels. The company has seen demand from smaller towns as they choose to shop from local stores instead of traveling to cities. Stores near residencies are doing better.
The company has identified new avenues of growth in the post-pandemic era as the country gradually learns to cope with the virus. Sales via distribution channels are witnessing growth.
He said that sales via digital retail have seen dramatic growth in India during the lockdown. The company has even sold products via video calls and WhatsApp.
The company was growing between 7% and 11% for the last five years before the pandemic struck. Its revenue fell 9% in the quarter ended in March 2020. He expects FY21 to be subdued due to disruptions caused by the virus and confident of attaining growth in the following years.
Consensus Estimate: (Source: marketscreener & investing India website)
The closing price of Bata was ₹ 1,345/- as of 01-Oct-2020. It traded at 179x/ 45x/ 37x the consensus EPS estimate of ₹ 7.5/ 29.8/ 35.9 for FY21E/ FY22E/ FY23E respectively.
Consensus target price of ₹ 1,290/- implies a P/E multiple of 36x on FY23E EPS of ₹ 35.9/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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17 Aug

85% of stores are open – Bata India

Update on the Indian Equity Market:
On Friday, Nifty closed 1.1% lower at 11,178. Among the sectoral indices PSU banks (-2.3%), Auto (-2.6%) and Bank (-2.3%) closed lower. Pharma (+1.4%) and Metal (+1.1%) closed on a positive side. Eicher Motors (-7.2%), Tata Motors (-4.8%) and M&M (-3.3%) closed on a negative note. JSW Steel (+2.6%), Coal India (+2.3%), and Sun Pharma (+2.0%) were among the top gainers.

Excerpts from an interview of Mr. Ashwani Windlass, Chairman, Bata India with Business Line on 13th August 2020:

• The market place is still uncertain. There are intermittent lockdowns happening and the pandemic is surging in different places.

• Consumers are still not going out as they use to go before and that puts a question in terms of demand.

• Categories like sports, chappals, sandals and casuals are more popular and are moving faster, as opposed to formal footwear.
• This behaviour is also justifiable with the current scenario as there are not many social gatherings and people are not going to offices.

• The company is responding to the trends through offerings in stores and also on digital campaigns.

• Markets are opening up but the footfall is less. Factories are also working with staff limitations.

• Key metros like Delhi, Mumbai, Chennai are showing positivity.

• The company is hopeful that after the current ‘End of Season’ sale, some demand will be back in festival season

• Tier-I towns in India, including metros, are more congested, and they witnessed a different level of surge first. Now, the spread is into tier-II or tier-III towns. For example, the tier-II towns in Karnataka and Kerala were doing well before the surge happened there.

• The impact in smaller cities will not be as much as what it is in the metros that has the bulk of the demand.
• At this moment, Bata is supplying what customer wants.

• On new store openings, Bata adds 50 retail outlets which are company-owned and at least 50 which are franchisee-owned in a normal year. However, this year the company will focus on cash conservation and look for franchisees.

Consensus Estimate: (Source: market screener & Investing.com websites)
• The closing price of Bata India was ₹ 1,234/- as of 14-August-2020. It traded at 218x/40x/34X the consensus earnings per share estimate of ₹ 5.6/30.5/35.9 for FY21E/FY22E/FY23E respectively.
• The consensus average target price for Bata India Ltd is ₹ 1,296/- which implies a PE multiple of 36x on FY23E EPS of ₹ 35.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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15 Apr

Testing times with zero revenue and major fixed costs – Sandeep Kataria, Bata India

Update on the Indian Equity Market:

On Monday, the Nifty closed 1.3% lower at 8,993 amid reports that the 21-day lockdown to contain the spread of the virus which ends on Tuesday might be extended. Pharma (+2.8%) and Metal (+1.9%) were the only sectoral gainers. Realty (-4.9%), Media (-3.3%), and Financial Services (-3.1%) were the top losing sectors. Among the stocks, the biggest gainers were Larsen & Toubro (+6.4%), Hindalco (+6.0%), and Bharti Airtel (+4.5%). Bajaj Finance (-10.3%), ZEEL (-8.4%), and Bajaj Finserv (-6.9%) led the losers.

Testing times with zero revenue and major fixed costs – Sandeep Kataria, Bata India

Excerpts of an interview with Mr. Sandeep Kataria, CEO, Bata India published in Mint on 13th April 2020:

  • As per the Union and State government guidelines, Bata India has closed both, the retail and online stores and factories. As a result, they are looking at a zero-revenue situation for the entirety of the lockdown period.
  • In the short-term, the revenues will be impacted but will recuperate slowly once the markets are allowed to open. Should the lockdown continue, it would be a difficult time for the company as there are major fixed costs to be paid. A government stimulus is needed soon, else managing the costs without revenues would become very difficult.
  • They have refrained from layoffs and are ensuring timely payment of salaries. This cannot continue for a long time. Landlords and mall owners have their own problems too. Hence, Bata is requesting the government to allow a moratorium on its debts in the short term. This might help the landlords pass some relief to the company as well.
  • Second, they request a wage subsidy from the government. The leather and footwear industry employs approximately 4.5 million people and Bata wants to make sure that there is no job loss as a result of the crisis. Hence, they are seeking a job support subsidy at 50 percent of the minimum wages from the government for at least four months.
  • Additionally, the industry has sought relaxation of statutory payments such as the goods and service tax (GST), provident fund and income tax.
  • Bata India has started production of masks and face shields at their Batanagar factory in Kolkata and donates these to the local hospitals, Police authorities, and communities. Additionally, the washable shoe range can help essential services staff stay safe.
  • They request the policymakers to classify footwear in the essential category of items and allow them to operate e-commerce delivery, and stores for limited hours to begin with.
  • Bata employs more than 10,000 people and salary cuts and layoffs are something they are looking to avoid. They need government support to ensure it does not come to that.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of Bata India was ₹ 1,198/- as of 13-April-2020.  It traded at 40x/ 34x/ 29x the consensus EPS estimate of ₹ 30.1/ 35.4/ 40.7 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price of ₹ 1,767/- implies a PE multiple of 43x on FY22E EPS of ₹ 40.7/-

 

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