“BUY” This Large Cap CDGS Stock With A Target Price of Rs. 2,370 Says Sharekhan

The brokerage’s take on Bata India Ltd.

According to Sharekhan “Bata India Limited (Bata) witnessed a consistent increase in footfalls across retail outlets and growth in sales through e-Commerce platforms in Q2FY2022 with business recovering to 95% of pre-COVID levels. The company expects sales to further improve on the backdrop of the ongoing festive season with cautious optimism. However, the likely emergence of third wave of COVID-19 would be a risk to the recovery in the near term. With strategic levers in place. The company has identified certain strategic levers, which will help the company achieve growth in FY2022 and thereon. The levers include maintaining a relevant portfolio, network expansion, becoming an aspirational brand for the youth, increasing digital footprint, creating an efficient supply chain, and bringing costs under control. Bata aims to focus on all these levers along with the right technology, process and talent, and responsibility towards the stakeholders of the company.”

The brokerage has also claimed in its research report that “Bata’s revenue is expected to deliver 29% CAGR over FY2021-24 to Rs. 3,655 crore on the back of its strategic levers supported by the network expansion strategy undertaken by the company. With cost efficiencies in place coupled with a better revenue mix. With cost efficiencies in place coupled with a better revenue mix, operating profit is expected to report 88% CAGR over FY2021-24 to Rs. 1,067 crore and OPM is expected to increase to 29.2% from 9.4% in FY2021. The company is expected to register a net profit of over Rs. 500 crore as against a loss reported in FY2021. ROE/ROCE to significantly improve to 22%/14% by FY2024.”

Buy Bata India Limited with a target price of Rs. 2,370

According to the brokerage’s research report “The company aims to build a portfolio focusing on casualisation. Bata launched 240 new lines across clusters in Q2FY2022, with a focus on an enhanced casual portfolio including Floatz and renewed range of North Star. The company also introduced Sneaker Studio as a pilot project in select stores, providing customers with a collection of nine brands under one roof. The company plans to expand the studios eventually. Casuals portfolio contributed 30% to the pre-COVID revenue and has risen to 40% currently.”

According to the brokerage’s call “Post the easing of the lockdown, Bata has started witnessing growth in footfalls in its stores. Improvement in mobility in the coming quarter augurs well for a faster recovery. Bata is focusing on expanding its presence through the e-Commerce/omni-channels and innovation in its product portfolio with new relevant variants to drive growth in the medium to long term. Under new leadership, growth is expected to improve with revamped strategies, backed by a strong liquidity position. The stock currently trades at 52.5x/45x its FY2023E/FY2024E EPS and 22.8x/19.6x its FY2023E/FY2024E EV/EBIDTA. We maintain Buy on the stock with an unchanged price target (PT) of Rs. 2,370. The emergence of third-wave and frequent lockdowns will impact the recovery momentum and will act as a key risk to our earnings estimates.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.