Buy This Mid-Cap Stock With Rs. 2200 Target Price, Registering 253% YoY Growth: Axis Securities

Reputed brokerage firm Axis Securities recommends investors to buy the stocks of Bata India. The company's overall demand improved as schools, colleges, and offices opened up while Sneakers continue to lead the growth recovery.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Bata India is Rs. 1922. Axis Securities has estimated a Target Price for the stock at Rs. 2200. This stock has the potential to give a 14% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 23,894 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1922
Target Price	Rs. 2200
Potential 1 year return	14.00%
52 week high share price	Rs. 2,262
52 week low share price	Rs. 1,592.10

Gross Margins improved to 56.6% (up 47bps YoY), but down 97bps QoQ on account of raw material inflation. The company's EBITDA Margins improved by 3,774bps/160bps on a YoY/QoQ basis on account of demand reviving to pre-Covid levels as well as cost rationalization measures undertaken by the company. EBITDA stood at Rs. 245 Cr on account of higher marketing expenses. Recurring PAT stood at Rs. 119 Cr.

Advantages Of The Stock: Axis Securities

According to Axis Securities, "Bata India Q1FY23 topline was in line with estimates with revenue at Rs. 943 Cr, registering a growth of 253% YoY (2% on 3-Year CAGR). The growth was driven by improved consumer sentiments, the opening of the economy, and higher realizations. Given the healthy business recovery in Q1FY23 and cautiously optimistic demand outlook going ahead, we maintain a Buy on the stock with an unchanged Target Price of Rs. 2,200/share and a target multiple of 43x (40-45x 5yr average PE band and discount to some of its listed retail peers) as we expect Bata's valuations to catch up going ahead."

"We expect the company to be a beneficiary of market share gains given store expansion in smaller towns where the unorganized segment is dominant but is facing pressure on passing on RM inflation through price hikes. Moreover, Bata's casualisation strategy through fast-growing sneakers will help attract a younger audience," the brokerage firm added.

Company portfolio: Bata India

Bata, a leading shoe-manufacturer, has 125 Sneaker studios across India (accounting for 19% of revenue) with Northstar leading the category in overall sales (margin accretive biz). Bata continued the up-shift in marketing investments with campaigns like Unlimited Sneaker and It's Got to be Bata, 24×7 Casual Collection. Bata added 74 stores in Q1FY23 taking the total store count to 1888 stores with over 800 towns covered. It added 13 franchise stores in Q1FY23 taking the total store count to 321 stores with over 275 towns covered under the franchise model. It has expanded its reach to 1,079 towns along with 39% Distributor WD by Exit Jun'22. It has also launched a pilot on Men's/Ladies Open value-added range.

Disclaimer

The above stock was picked from the brokerage report of Axis Securities. 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.