Motilal Oswal's research report on Bata India
BATA’s revenue increased 17% YoY/25% on pre-Covid basis leading to 12%/ 4% YoY growth in EBITDA/PAT in 4QFY23. This was attributed to the Omicron base effect, 15% price increase, and a 13% footprint expansion. However, this also indicated that the volume growth was soft as the <INR1,000 ASP product category is yet languishing. Weakness in volumes, pressure from the value segment (<INR1,000 ASP category), and limited incremental price hike possibilities in FY24E may put pressure on the performance, but moderation in RM prices and inflation could drive gradual recovery. We factor in revenue/PAT CAGR of 12%/28% over FY23-25 and maintain our estimates. Reiterate Neutral with a TP of INR1,660. We project a low probability of price hikes in FY24, while moderating RM prices as well as improved ASPs led by premiumization could be the silver lining. The demand recovery (volume growth) especially in the mass segment could act as a catalyst too.
Outlook
BATA’s footprint addition guidance continues to remain robust with plans to add nearly 150 stores annually. We model a revenue/PAT CAGR of 12%/28% over FY23-25 and ascribe a P/E of 40x on FY25E to arrive at our TP of INR1,660. Maintain Neutral.
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