Buy this shoes stock, target price Rs 2365: Edelweiss

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Bata India Stock Outlook

The current market price of the share is Rs 1916 each with a 52 week high of Rs 2261 each and a 52 week low of Rs 1608 each. The company has a market capitalization of Rs 24,635 crore. According to the latest report from Edelweiss, if investors buy the stock at its current market price, it has the potential to climb to Rs 2365 apiece.

The title gave a return of 182% in 5 years, 30% in 3 years and 9% in 1 year.

Casual wear and sneakers continue to drive growth

Casual wear and sneakers continue to drive growth

BATA is experiencing a significant demand for fashionable, functional and comfortable footwear. Accordingly, BATA continued to focus on the casual wear and sneaker category and invested in marketing campaigns to drive growth. The company opened 18 sneaker studios during the quarter, bringing the total to 125 stores. The sneaker category now contributes about 19% of total revenue, about 4% more than in the pre-COVID-19 era.

BATA is focusing on multiple levers to grow the sneaker category, including collection design, marketing, and rollouts across various outlets.

Focus on store and distribution expansion

Focus on store and distribution expansion

BATA continues to expand its reach through new franchise stores and multi-brand outlets (MBOs). It opened more than 20 new franchise stores (EBOs) during the quarter, bringing the total to 323 with a goal of reaching 500 such stores over the next 2-3 years. BATA’s MBO reach now stands at 30,000 outlets in approximately 1,100 cities.

The company’s focus on expanding distribution reach in small towns has led to market share gains from unorganized players. BATA is also focusing on a store renovation strategy to improve the customer experience and renovated 64 stores during the quarter.

EBITDA and PAT of Bata India

EBITDA and PAT of Bata India

Gross margin contracted 97 basis points QoQ to 57% due to RM cost inflation and an unfavorable product mix. However, EBITDA increased by 51% qoq to INR 245 cr, driven by higher revenues, with an increase in EBITDA margin from 157 bps qoq to 26% driven by cost savings. employee expenses. PAT increased by 90% QoQ to reach INR119cr (6% higher than our estimate).

Evaluation

Evaluation

According to Edelweiss, “Although BATA’s ASP was up 19% year-on-year (reflecting higher prices due to higher GST rates and easing RM inflation), its volumes are still somewhat lower than pre-pandemic levels. We believe that a strong focus on formal, fitness and leisure footwear, coupled with the expansion of distribution, would help the company recoup the volumes lost in the short term.”

“Similarly, BATA’s margins are at 90% of pre-pandemic levels due to higher marketing spend during the quarter. We expect the company’s margins to gradually improve and reach pre-pandemic levels in ‘here FY24E. We reaffirm our ‘BUY’ rating on BATA with a TP of INR 2,365/share, valuing the company at 53x earnings in FY24E.”

About Bata India

About Bata India

Bata India is the largest shoe retailer and manufacturer in India and is part of the Bata Shoe Organization. Incorporated as Bata Shoe Company Private Limited in 1931, the company was originally established as a small operation in Konnagar (near Calcutta) in 1932. In January 1934, the foundation stone for the first Bata operation building – now called Bata. In the years that followed, the overall area of ​​the site was doubled. This township is popularly known as Batanagar. It was also the first manufacturing facility in the Indian footwear industry to receive ISO:9001 certification.

Disclaimer

Disclaimer

The actions above are taken from the brokerage report of Edelweiss Broking Ltd. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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