Bata Q2 Results Review - Recovery Expected Ahead Of Festive Season; Maintain 'Accumulate': Dolat Capital

Dolat Capital Report

Bata India Ltd.’s Q2 FY24 results came below our estimate. The company’s store network increased 10.0% YoY, but sales de-grew by 1.3% with low single digit same-store sales de-growth.

On four-year basis, Relaxo Footwears Ltd. exhibited 3.6% growth while Bata registered 3.2% increase.

The company has continued its sneakerization journey. In Q2 FY24 it has implemented sneaker studios across 612 stores. Sneakers growth is driven by strong growth in North Star brand.

Bata continued with its retail expansion drive in tier 3-5 cities through franchise route. During the quarter, the company added 28 (net) new franchise stores, taking the franchise store count to 476.

The company also scaled up its distribution business in multi brand outlets crossing 1,390 plus towns. Further, Bata initiated multiple new campaigns across Casual Style, Bata Red Label, Bata Pujo and Power Apparel.

We have lowered our FY24/25E earnings per share estimates by 12.4/9.6% at Rs 29.3/34.1 to factor in Q2 performance and introduced FY26E EPS at Rs 39.0. Going ahead,

1. favorable base,

2. new advertising campaigns,

3. continued E-com traction and

4. ramp-up in store openings would be key triggers.

Valuing at 44 times FY26E earnings per share arrived at target price of Rs 1,717. Maintain 'Accumulate'.

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