For 1QFY2020, Bata India (BIL) posted strong set of numbers, exceeding our
expectations on bottom-line front. Revenue grew by ~11% yoy. The company’s
operating margins improved by robust 141bps yoy (after adjusting rent cost). On
the bottom-line front, BIL reported growth of ~22% yoy to `101cr on the back of
strong operating performance.
Outlook and Valuation: We expect BIL to report net revenue CAGR of ~15% to
~`3,805cr over FY2019-21E mainly due to increasing brand consciousness
among Indian consumers, new product launches, higher number of store additions
in tier II/ III cities and focus on high growth women’s segment. Further, on the
bottom-line front, we expect CAGR of ~16% to `436cr over the same period on
the back of margin improvement (increasing premium product sales). Thus, we
maintain our Buy recommendation on Bata India with Target Price of `1,525.

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