Bata India's Revenue Up 253% YoY, Buy Stock With Rs. 2151 Target Price, For High Return: Geojit

Reputed brokerage firm Geojit has recommended investors to buy the stock of Bata India. In Q1FY23 the company's revenue grew by 253% YoY (up 42% QoQ), on a low base (+2% on a 3 years CAGR basis).

Stock To Buy: Target Price

The Current Market Price (CMP) of Bata India is Rs. 1859. Geojit has estimated a Target Price for the stock at Rs. 2151. This stock has the potential to give a 16% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 24,039 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1859
Target Price	Rs. 2151
Potential 1 year return	16.00%
52 week high share price	Rs. 2,262
52 week low share price	Rs. 1,592.10

Financial Result

Bata opened 20 new franchise stores in Q1FY23 and the total franchise stores reached 323 (275+ towns covered Vs 234 in Q1FY22), and it targets to open 500. The digital penetration increased to 10% Vs 5% in FY20. The continued growth of the ‘Sneaker' category led to the growth recovery. Bata has added 125 (100 QoQ) Sneaker studios to display up to 300 styles across 9 brands, which now contributes ~19% of total revenue, up by 400bps from pre-covid levels.

A strong focus on expanding distribution reach, including digital, along with strong marketing investments and casualization of products portfolio will drive volumes going forward.

Why Should You Buy Stock Of Bata: Geojit

"We believe, Bata has the capability to revive its revenue growth trajectory as the economy is back to normal. The demand outlook is positive given normalization of markets and the strong thrust of the GoI to revive the economy. Bata has a strong brand recall and distribution reach and a strong balance sheet. We upgrade to Buy rating with a revised Target of Rs. 2,151 by valuing at 53x on FY24E EPS, factoring strong sales recovery in the quarter," Geojit mentioned.

"With the re-opening of markets, we expect the volumes to pick up going forward. The distribution reach has now crossed 1,079 towns Vs 917 YoY. To reach smaller towns, the company opens new stores via franchise routes and ensures availability in multi-brand outlets via distribution channels. We expect revenue to grow at ~29% CAGR over FY22E-24E," the brokerage firm added.

Company Portfolio

Bata India Ltd (BIL) is the largest retailer and leading manufacturer of footwear in India with around 1,700 retail stores as of June 2022. BIL reported EBITDA at Rs. 245 crore vs Rs. 34 crore loss YoY supported by a strong recovery in sales. Gross profit margin improved by 40bps to 56.6% aided by price growth and change in Mix. ASP (Average Selling price) increased by 19% YoY for compensating cost and GST increase. BIL now strongly focuses on cost reduction measures across operations & manufacturing including variabilisation of cost.

Disclaimer

The above stock was picked from the brokerage report of Geojit. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.