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Dolat Capital Report
Bata India Ltd.'s Q1 FY21 financial performance was significantly below our estimate. Nationwide lockdown not only impacted the revenue performance but also impaired margins significantly.
Given that 25-30% of Bata stores are in malls, the company would take longer to witness revamp in footfalls, which would severely impact profitability.
Bata witnessed strong revenue growth in past couple of years, mainly led by increase in average selling prices. We believe that the expected down trading would pressurize ASPs going ahead.
Though significant negative impact is expected on sales; costs like rent, other operation related costs would not decline in the same proportion. Hence, Bata would take abnormally longer time to restore margins registered in pre-Covid-19 period.
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