Bata India

Brokerage firm ICICI Direct is strongly betting on the stock of Bata India. The company has set a potential upside target of 13 per cent on the stock from current levels of Rs 575 to Rs 650. Bata plans to add 100 new company owned-company controlled (COCO) stores and around 50 new franchisee outlets.

"The COCO stores are expected to open in malls and high street locations while the company will expand its presence in Tier II and Tier III cities via the franchisee route. Bata is planning to increase the share of women's footwear from existing 26% to 35% over the next two years," ICICI Direct has stated in its research report.

Bata India: A huge beneficiary of GST

The company is also likely to be a huge beneficiary of the recently implemented Goods and Services Tax.

"Since 60 per cent of the footwear industry is still dominated by unorganised players, GST would be positive for organised players like Bata as higher compliance cost for unorganised players would create a level playing field, which may lead to market share gains for Bata," ICICI Direct has noted in its report. The company is also looking to increase its advertisement spend as a part of its strategy.

Fundamentals of Bata India

Bata India has a Return on Capital Employed at 16 per cent in FY 2017. ICICI Direct expects the same to move higher to 20.6 per cent in the coming days. The brokerage firm expects the company to report an EPS of Rs 21.7 in FY 2018-19 and if one applies a target p/e of 30 times, the stock should trade at around Rs 650. "Aggressive retail expansion and enhanced product portfolio would aid in boosting revenue growth.

We revise our revenues and earnings estimates upwards for FY19E. Accordingly, we upgrade the stock to buy with a revised price target of Rs 650 ((based on 30x FY19E EPS of Rs 21.7).

Havells India

ICICI Direct is also recommending investors to buy the stock of Havells India. The brokerage firm believes that the company will benefit from the 7th pay commission and also from recovery in the industrial segment. "We believe consumer durable companies will be key beneficiaries of the government's key reforms like implementation of GST and pay hike.

"While the Seventh Pay Commission boosted the disposable income of 1.4 crore government
employees, GST will bring down the effective tax rate of the company," the brokerage firm has said in its research report.

Fundamentals of Havells India

ICICI Direct sees Havells India reporting an EPS of Rs 15 by 2018-19. "The strong cash flow from Havells'core business coupled with minimal debt/equity (as large part of acquisition financed through internal accrual) would strongly position the company to negate any short -term hiccups. We maintain our buy recommendation on the stock with a revised target price of Rs 540, valuing the company at 36 times," the brokerage firm has said. 

Disclaimer

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