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Wednesday, 30 November 2016

                                       BATA INDIA LTD- September Quarter FY17 

BATA INDIA LTD one of the popular & credible brands of India reported second quarter FY17 with Revenue rising 2% YOY from Rs. 5747 Mn to Rs. 5837 Mn corresponding period previous year. Net Profit in the current September quarter stood at Rs. 346 Mn compared to Rs. 544 Mn in Q2 FY16, declining by 36% YOY. Decline is with respect to exceptional item of Rs. 317 Mn reported in Q2 FY16. Excluding this item, Net Profit or PAT has handsomely jumped by 53% YOY. EBDITA is also on a strong footing rising 17% YOY at Rs. 676 Mn against Rs. 578 Mn in Q2 FY16. EBDITA Margin has also risen 153 basis points on yearly basis and was reported at 11.58% in the current September quarter. Other Income has increased both quarterly and yearly by 27% and 45% respectively. Other Income was reported at Rs. 141 Mn in the current September quarter. Operational Expenditure was curtailed at Rs. 5462 Mn declining 10% QOQ whereas it was constant in yearly terms. Though the yearly numbers are healthy, quarterly growth is somber as Revenue, PAT & EBDITA have fallen in double digits. Revenue has declined by 13% QOQ, EBDITA followed suit plunging by 27% quarterly and Net Profit 31% QOQ.  The June quarter has always been the strongest quarter for the company and as such highest sales or revenue is recorded in the quarter ended 30th June. This is on account of re-opening of educational institutions across India leading to higher revenue and PAT for the company as BATA is still regarded as the most trusted brand for school & Kids footwear across India. Though it has maintained its leadership position in branded footwear industry, the company needs to reinvent beyond its June syndrome and take competition head on both from unorganized sector and organized players like Relaxo, Paragon to name a few.

Bata stands for Trust, Superior Quality & Credibility and it has maintained it for over more than 85 years. In the present scenario, the company has over 1265 Bata stores, sells 50 million pairs and serves 120000 customers every day. We recommend BUY for the stock for medium & long term investment with PE multiple of 29.13x FY17E & 26.47 x FY18E. P/BV is seen at 2.28x FY17E & 2.10 x FY18E with target price of Rs.495.

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