Investment Pick - Bata India Ltd.
* Bata India reported better number sequentially but remain muted as compared to Q2FY20 due to pandemic. Its revenue stood at Rs 368 cr which grew by 172% QoQ. Its EBITDA reported profit of Rs 18 cr as compared to EBITDA loss of Rs 86 cr QoQ. On bottom-line its loss narrowed down to Rs 44 cr as compared to loss of Rs 101 cr in Q1FY21. Going forward, management expects improvement but at a very gradual pace which means FY22E onwards we would see decent growth. Maintain Buy.
* Over the years Bata has been a consistent performer, however, Q1FY21 was severely impacted due to lockdown led by Covid-19. Further in Q2FY21 with opening of economy sales is picking up at gradual pace but as the situation is still uncertain we expect FY21 growth to remain muted.
* Nonetheless, we expect the company to regain in FY22E as the situation stabilises and demand would pick-up on the back of better product mix, increasing presence in e-commerce space and growing distribution network by expanding in semi-rural market and aggressively promoting brands through advertisements. Besides, it has healthy balance sheet and strong cash flows which is an added advantage and this would aid to sustain in tough times. Hence, we have maintained a Buy on the stock with target price of Rs. 1,669.
Buy Bata India Ltd @ 9-12 Months CMP 1484.4 TGT 1,669
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