Company Update : Bata India Ltd By Motilal Oswal Financial Services Ltd
Continues to report tepid growth
* Revenue at INR9.2b (4% miss) grew by a modest ~2% YoY. Revenue growth was majorly driven by volume growth.
* Gross margins expanded ~10bp YoY to 56.2% (down ~40bp QoQ) and were ~80bp below our estimate.
* Gross profit increased 2% YoY to INR5.2b (~5% miss).
* EBITDA increased 9% YoY to INR2b (5% miss), driven by strong cost controls as SG&A costs declined ~4% YoY, while employee costs rose by a modest ~1% YoY.
* Margins expanded 150bp YoY to 21.7% (broadly in line).
* Reported PAT at INR587m rose by a modest ~1% YoY (22% miss). Bata reported ~INR108m of VRS cost as an exceptional item.
* Adjusted for the same, PAT grew 15% YoY to INR669m but came in ~11% lower than our estimate due to lower EBITDA and other income (-11% YoY).
Management commentary:
* The company’s focus on driving affordability and reducing complexity across categories has resulted in significant volume growth after a long time.
* The company leveraged the extended End of Season Sale to reduce aging inventory, resulting in volume gains despite muted demand.
* The premium portfolio, Hush Puppies, experienced double-digit growth, helping to sustain margins.
* The company increased its market reach through omnichannel initiatives, such as entry into quick-commerce and continuous expansion into newer towns.
* The management remains optimistic about demand recovery, driven by concerted efforts to drive volume-based revenue growth through affordability and freshness. Bata plans to remain cautious on costs while focusing on efficiency and productivity.
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