Q3FY21 Result Update - Bata India - ICICI Direct

Bata India witnessed a healthy QoQ recovery with revenue recovery rate reaching 74% in Q3FY21 vs. 51% in Q2FY21. Profitability continues to remain impacted by an unfavourable product mix. Revenue fell 26% YoY to Rs. 614.7 crore. Aligning with the current demand scenario, Bata has tweaked its product portfolio from formals & fashion categories to casuals, fitness & essential categories covering comfortable sneakers, open & sandals styles. This led to a faster pick-up in volumes (reached 88% of pre-Covid levels in Q3FY21). Gross margins continued to contract sharply by ~910 bps YoY to 51.5% mainly owing to unfavourable product mix. Bata undertook rationalisation of fixed overheads with employee, other expenses declining 17%, 18% YoY to Rs. 81 crore, Rs. 107.3 crore, respectively. Subsequently, EBITDA margins fell 1260 bps YoY to 19% (Q2FY21: 5%). The company reported exceptional expense worth Rs. 4.6 crore pertaining to one-time expense for voluntary retirement scheme. Ensuing PAT came in at Rs. 25.8 crore (down 78% YoY) vs. net loss of Rs. 44.3 crore in Q2FY21.

Valuation & Outlook

Formal and fashion footwear demand is likely to stay muted in the near term due to fewer social gatherings. Unfavourable product mix (shift towards casual category) may lead to deterioration in gross margins in near term. However, cost rationalisation initiatives will benefit Bata in the longer term. We revise our earnings estimates downwards for FY21, FY22E to reflect current quarter's performance (broadly maintain FY23E estimates). Bata continues to have a healthy balance sheet with surplus cash of ~Rs. 800 crore (H1FY21). We believe with its strong brand patronage and pan-India retail reach, it should be able to revive its revenue growth trajectory as and when the impact of the pandemic is phased out. We reiterate HOLD rating on the stock with an unchanged target price of Rs. 1680 (42x FY23E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Bata_Q3FY21.pdf

Shares of BATA INDIA LTD. was last trading in BSE at Rs.1553 as compared to the previous close of Rs. 1527.2. The total number of shares traded during the day was 40722 in over 2675 trades.

The stock hit an intraday high of Rs. 1563 and intraday low of 1526.25. The net turnover during the day was Rs. 63111585.

Source : Equity Bulls

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