For 2QFY2019, Bata India (BIL) posted strong set of numbers, exceeding our expectations on bottom-line front. Revenues grew by ~15% yoy (in-line with our estimate). The company’s operating margins improvement by robust 199bps yoy. On the bottom-line front, BIL reported growth of ~30% yoy to `56cr on the back of strong operating performance.

Outlook and Valuation: We expect BIL to report net revenue CAGR of ~15% to ~`3,494cr over FY2018-20E 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 ~22% to `329cr 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 `1,243.

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