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HDFC Securities Institutional Equities
Bata India Ltd.'s premiumisation-volume trade-off strategy proved suboptimal vis-a-vis peers over FY15-23 (lost 10% plus market share over FY15-23; ~13/16% FY23 revenue/Ebitda share).
While our initial thesis on Bata's difficulty in winning volumes played out, we interacted with management to understand if Bata has a volume fix up its sleeve. Key takeaways from the interaction, the focus is on
continuing to improve price and product range across channels;
improving distributor and franchisee unit economics; and
making the cost structures variable (to a point).
While we maintain our 'Reduce' rating with an unchanged discounted cash flow-based target price of Rs 1,500/share (implying 35 time September-25 price/earning), we are waiting for execution on the above initiatives before we can get more constructive on the name.
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