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In-line growth, steady margins

Bata India's (BATA IN) Q1FY27 revenue and EBITDA were in -line with our estimates, while PAT beat our estimates by 10.1%, led by lower depreciation and interest expenses. Revenue growth was led by premiumisation and volume growth. Hush Puppies and Floatz outpaced the mass portfolio, with BATA performing well , led by women's category, while North Star remained a drag amid portfolio rationalisation ahead of a stronger collection. Management flagged 5 – 6% cost inflation from imported synthetics, being offset via price hikes, with benefits likely to be visible from September. We maintain our FY27E/28E estimates, retain TP of INR 781 on 45x FY28E P/E, and maintain Accumulate.

Revenue up 3.9% on premiumisation and volume growth:

Revenue grew 3.9% YoY to INR 9,789mn on broad -based growth across channel s, with significant growth from e-commerce platforms . Store -line rationalisation continues, with average lines reduced to ~68% of levels two years ago (target ~60%), aiding productivity. ZBM scaled to 775 stores (~550 in Q 4FY26), enhancing consumer experience and store productivity . A significant portfolio refresh is planned through H2FY27 across design, comfort and technology. Continued premiumisation, e-commerce scale -up, ZBM expansion and franchise traction should reinforce momentum. We maintain our 5.2% revenue CAGR estimate for FY26 -29E, led by premium -category mix and network expansion.

Margin to reach 20.9% by FY28E:

Gross margin improved 127bps YoY to 54.8%, aided by full - price sales (~90%) and lower markdowns, with stock turns improving to 2.7x. Adjusting for ~100bps channel -mix dilution, like -for-like gross margin expansion would have been higher by ~230bps YoY . EBITDA margin declined 27bps YoY to 20.8% on ~25% YoY higher ad spend (A&P now ~3 – 3.5% of sales from ~2.5% earlier), a non -cash forex loss on license fees of INR 27mn , and a one -time ERP cost of INR 24mn. The company targets to improve margins by 200bps over 3 -5 years through v endor consolidation initiatives (from 120+ to ~60 partners, targeting 30). We maintain margin estimates reaching 21.3% by FY2 9E.

Network expansion to prop up growth:

Franchise network reached ~750 stores within the 2,000+ EBO base, with 600+ potential trade areas identified for further expansion. Franchise LFL growth stayed healthy at high -single digits over four quarters, with partner ROI of 18 – 24%. Gross inventory f ell over 10% YoY on improved quality/quantity aiding footfall conversion . Management is cautiously optimistic, with monsoon -led deferred demand recovering in July/early August, while monitoring inflation's impact on industry demand.

Retain Accumulate with TP maintained at INR 781:

We expect a revenue CAGR of 5.2%, an EBITDA CAGR of 7.3% and a PAT CAGR of 10.4% in FY26 -29E. Going ahead, growth will be driven by ZBM -led store productivity, product -funnel transformation and continued premiumization. We retain our estimates, and maintain our TP of INR 781, on 45x FY28E P/E (unchanged) . We maintain Accumulate s. Key risk s include intense competition , demand slowdown and continuous cost inflation.

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