Company Update : Bata India Ltd By Motilal Oswal Financial Services Ltd
Weak results; 5% miss on EBITDA, led by lower gross margin
* Revenue at INR7.9b (5% miss) declined ~1% YoY (vs 2% YoY growth in 3Q), as ~5% YoY store additions were likely offset by a decline in SSS.
* Bata added nine net stores in 4Q, bringing the total store count to 1,962 (+5% YoY).
* It added gross 19 franchised stores, driven by its franchise-led model, while likely closing 10 underperforming stores.
* Gross margins contracted 229bp YoY to 57.9% (though up 165bp QoQ) and were ~245bp below our estimate.
* Gross profit declined 5% YoY to INR4.6b (9% miss).
* EBITDA declined 2% YoY to INR1.76b (5% miss), as higher employee costs (+17% YoY) and weak GM were offset by lower SGA (-20% YoY).
* Margins contracted ~22bp YoY and stood at 22.3% (in line).
* Adj PAT declined 28% YoY to INR459m (26% miss) due to weaker EBITDA and higher D&A (+15% YoY) and finance costs (+12% YoY).
FY25 review: Subdued performance continues
* Revenue at INR35b was flattish YoY for <1% CAGR over FY23-25.
* Gross profit remained flat (-1% YoY) at INR19.6b, as gross margin contracted 80bp YoY to 56.3%.
* EBITDA declined ~6% YoY to INR7.3b, with EBITDA margin contracting ~150bp YoY to 21.1%.
* Adjusted PAT at INR2.5b declined 15% YoY (23% below FY23 levels).
* Net working capital days improved sharply to 116 (from 137 in 1HFY25 and 161 FY24), led by a healthy reduction in inventory days to 195 (vs 227 YoY).
* FY25 FCF (post leases) improved to INR2.9b (from (-) INR226m YoY), supported by healthy OCF at INR3.6b and lower capex due to franchisee-led expansion.
Management commentary:
* Despite continued market headwinds, Bata continues to pursue its strategy of driving volume-led growth.
* The company reduced its gross inventory by 15%, driven by initiatives to improve stock turns, enhance forecast accuracy, etc.
* Management is focused on deploying fresh merchandise in anticipation of demand revival and an uptick in consumption.
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