Bata Shares Drop Nearly 5% After Q1 Results; Citi Maintains ‘Sell’ Rating

Shares of Bata India dropped nearly 5% in morning trade on Wednesday a day after the company announced its results for the quarter ended June 2024.

Bata India’s shares opened lower at Rs 1,463.85 per share and further declined as much as 4.82% from previous close to hit an intraday low of Rs 1,442.05 apiece on the BSE. However, the stock recovered some of early losses to trade at Rs 1,448 per share, down 4.44%, around 10:15 a.m.

The shoemaker’s revenue from operations for the first quarter of the current fiscal year decreased 1.4% to Rs 944.63 crore, compared to Rs 958.14 crore in Q1FY24. However, the company’s consolidated net profit for the quarter jumped 63.1% to Rs 174.4 crore against Rs 106.89 crore in the same period a year ago.

Bata also recorded a one-time gain of Rs 134 crore from the sale of property. The company also reported a one-time expenditure of Rs 14.7 crore towards investments in technology.

Brokerage Citi maintained a ‘Sell’ rating on the Bata India stock with a target price of Rs 1,050 apiece, indicating a downside of 30.69% from the previous close of Rs 1515.1 per share.

Bata India’s revenue, EBITDA, and profit before tax (excluding exceptional items) declined by 1%, 23%, and 42% year-over-year, respectively, the brokerage observed. These figures were 7%, 30%, and 51% below consensus estimates. The reported PAT grew by 62% YoY, primarily due to a one-time gain of Rs 134 crore from the sale of land, the brokerage said in its note.

Despite multiple initiatives, such as expanding reach with over 350 new company-owned and franchise stores since the end of FY20 and various product launches, Bata’s performance remains underwhelming. Compared to the pre-Covid period, revenue CAGR was only 1.4%, the lowest in the last nine quarters, while EBITDA CAGR was -5% and PBT (excluding exceptional items) CAGR was -12%.

The Ebitda margin declined by 548 basis points YoY to 19.6%, with a 288-basis point drop QoQ and a 794 basis point drop compared to Q1FY20. The press release indicated that the margin was negatively impacted by a one-time technology investment of Rs 14.7 crore, leading to a 156 basis point adverse impact, the broker added in its research note.

Citi highlighted that Bata India continues to underperform other consumer discretionary and retail companies within its coverage in terms of growth.  

Bata India also announced that its board has approved an interim dividend of 200% at Rs 10 per equity share of Rs 5 for the current fiscal year (FY25). The record date for the dividend payment is set for September 2, 2024.