Bata India Q4 Results Review - Expect Gradual Recovery; Downgrade To Reduce: Dolat Capital

Dolat Capital Report

Bata India Ltd.’s Q4 FY24 results were ahead estimate. Revenue grew by 2.5% with 39% volume growth across e-com channel. On a four-year basis, Relaxo exhibited 8.4% growth while Bata registered 6.5% increase.

The company has continued its sneakerization journey. In Q4 FY24, Bata implemented sneaker studios across 698 stores. Further, it launched first Power exclusive brand outlet during the quarter. Moreover, it plans to extend Power brand across categories like apparel (currently present in 70 stores). Bata aims to open 10 Power EBO’s and expand apparel reach to 100 stores by Dec-24. In addition, Bata also scaled up its distribution reach across 1,538 towns.

Bata continued with its retail expansion drive in tier-3/4/5 cities through franchise route and added 24 (net) new stores, taking the franchise store count to 533.

Further, the franchise volume growth was ~25%. Going ahead, management aspires to add 40 franchise every quarter.

We lower our FY25/26E EPS estimates by 7.6/8.2% at Rs 27.2/32.9 to factor Q4 performance.

Key triggers are-

1. favorable base,

2. new advertising campaigns,

3. continued E-com traction and

4. ramp-up in store openings.

Increase in brand investment would pressurize margin in FY25E. Valuing at 45 times FY26E EPS we arrive at target price of Rs 1,480. Downgrade to ‘Reduce’ rating from Accumulate.

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