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Multibagger Footwear Company's Revenue Grew 42% QoQ, Expect 23% Upside, Buy Stock: Says Edelweiss
Top brokerage firm Edelweiss Wealth Research recommends investors to buy the stocks of Bata India. The company's revenue grew by 2.5x YoY and 42% QoQ to Rs. 943 crore, led by pent-up demand for formal wear, continued momentum in the sneaker shoe category, and higher realization on account of price hikes. In the past 5 years, Bata's stock price surged aggressively by 179.95%, making it a multibagger stock.
Stock To Buy: Target Price & Financial Result
The Current Market Price (CMP) of Bata India is Rs. 1922. Edelweiss Wealth Research has estimated a Target Price for the stock at Rs. 2365. This stock has the potential to give a 23% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 24,636 crore. The company is offering a 2.84% dividend yield.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 1922 |
| Target Price | Rs. 2365 |
| Potential 1 year return | 23.00% |
| 52 week high share price | Rs. 2,262 |
| 52 week low share price | Rs. 1,592.10 |
Bata's gross margin contracted by 97bps QoQ to 57% on account of RM cost inflation and unfavourable product mix. However, EBITDA grew by 51% QoQ to Rs. 245cr, led by higher revenue, with EBITDA margin expansion of 157bps QoQ to 26% on account of savings in employee spend. Its PAT grew by 90% QoQ to Rs. 119 crore. Traction in Bata's e-commerce channel continued post the pandemic, as its salience increased 2.5x over Q1FY20 (70% QoQ) with ~10% contribution to revenue on account of growth in its D2C website bata.in, online marketplaces and omni-channel home delivery.
Advantages Of The Stock: Edelweiss Wealth Research
Regarding the stock, Edelweiss Wealth Research mentioned, "Though BATA's ASP grew by 19% YoY (reflecting price hike on account of GST rate hikes and mitigation of RM inflation), its volumes are still a tad lower compared with pre-pandemic levels. We believe a strong focus on formal, fitness and casual footwear, coupled with distribution expansion would help the company recoup lost volumes in the near term. Similarly, BATA's margins are at 90% of pre-pandemic levels on account of higher marketing spending during the quarter. We expect the company's margins to gradually improve and reach pre-pandemic levels by FY24E. We reaffirm our 'Buy' rating on BATA with a TP of Rs. 2,365/share, valuing the company at 53x FY24E earnings. With these initiatives, we expect BATA to witness 27% revenue CAGR over FY22-24E."
Bata Stocks: Company portfolio
BATA, a leading footwear manufacturing company in India, is witnessing significant demand for fashionable, functional, and comfortable footwear. As a result, BATA continued to focus on the casual wear and sneakers category and invested in marketing campaigns to drive growth. The company opened 18 sneaker studios during the quarter, taking the total to 125 stores. The sneakers category now contributes ~19% to total revenue, ~4% higher than in the pre-Covid-19 era. The company is now present in ~1,900 exclusive brand outlets (EBOs) across the country (including franchisee stores) and plans for aggressive store openings over the next 2 years.
Disclaimer
The above stock was picked from the brokerage report of Edelweiss Wealth Research. 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.
