1
Jun 04, 2018
Bata India Ltd
India Research - Stock Broking
HOLD
Recommendation (Rs.)
CMP (as on Jun 01, 2018) 766
Target Price 860
Previous Target Price 845
Upside (%) 12.4
Stock Information
Mkt Cap (Rs.mn/US$ mn) 98388 / 1467
52-wk High/Low (Rs.) 833 / 511
3M Avg. daily value (Rs. mn)
525.9
Beta (x) 0.9
Sensex/Nifty 35227 / 10696
O/S Shares(mn) 128.5
Face Value (Rs.) 5.0
Shareholding Pattern (%)
Promoters 53.0
FIIs 6.2
DIIs 25.1
Others 15.7
Stock Performance (%)
1M 3M 6M 12M
Absolute (2) 6 5 39
Relative to Sensex (2) 2 (2) 24
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Pulakit Suryakar
040 - 3321 6277
suryakar.pulakit@karvy.com
For private circulation only. For important information about Karvy’s rating system and other disclosures
refer to the end of this material. Karvy Stock Broking Research is available on Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 24559 25043 26412 28657 31523
EBITDA 2758 2786 3513 4149 4490
EBITDA Margin (%) 11.2 11.1 13.3 14.5 14.2
Adj. Net Prot 2177 1594 2205 2642 2853
EPS (Rs.) 16.9 12.4 17.2 20.6 22.2
RoE (%) 19.4 12.5 15.8 16.3 15.2
PE (x) 24.7 59.9 44.6 37.3 34.5
P/BV (x) 2.2 3.6 3.3 2.8 2.5
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
Youth Connect and Premiumisation - Key for Future Profitability
Focus On Value-Added Products & Efficiencies In Cost Structure: For
Q4FY2018, Bata India Ltd reported 5.7% YoY increase in revenue at Rs. 6323 Mn
(revenue is reported net of GST). However, on a comparable basis, the revenue
grew in double digits with same-store sales growth (SSSG) of 5-6%. The gross
margin has expanded because of the focus on value-added products in its revenue
mix and soft input prices. Operating prot margins increased ~365 bps YoY to
13%. The strong margin expansion was a result of an improved product mix and
segments which extracted higher realizations and cost eciencies. Despite a
higher tax rate of ~33% in Q4FY2018, PAT came in at Rs. 485 Mn, up by 24% YoY.
Hence, we maintain our ‘HOLD’ rating by valuing Bata India at a P/B multiple of
2.8x of the FY20E BV for a target price of Rs. 860.
Product Diversification/ Premiumisation boosted Margin Expansion:
From a decade or so, Bata is trying to catch the youth pulse focusing towards the
fashion-conscious men, working women and children through their ever-improving
product mix. Going by the current trends, Bata added new products with enhanced
technology like memory cushion like Insolia (comfortable high-heeled shoes). Bata
India has launched a new international ‘Red’ label exclusively for ladies along with
better visual merchandising. The constant improvement in the product mix, great
pricing and cost eciencies should keep the company on the growth trajectory and
lead to margin expansion in the years to come.
Valuation and Risks
The constant improvement in the product mix, great pricing and cost eciencies
should keep the company on the growth trajectory and lead to margin expansion
in the years to come. Hence, we maintain our ‘HOLD’ rating by valuing BATA India
at a P/B multiple of 2.8x (3- year average P/B) of the FY20E BV for a target price of
Rs. 860 representing an upside potential of 12.4%.
Earnings Revision (%)
YE Mar FY19E
Sales (%) 5.0
EBITDA (%) 10.2
PAT (%) 28.1
Source: Karvy Research
L
L
L
Company Update
Consumer Discretionary-Apparel, Footwear & Acc Design
Bata India Ltd
Bloomberg Code: BATA IN
80
100
120
140
160
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar -18
Apr-18
May-18
Bata India Ltd
Sensex
2
Jun 04, 2018
Bata India Ltd
Key takeaways from quarterly earnings
Bata has embarked on an ambitious journey with the aim to be a $1- billion company
over the next ve years by focusing on Tier II and Tier III cities. It has identied 435
such cities to expand via franchisee route. The management expects to add ~100
stores in FY19E
In Q4FY18, Bata opened its rst standalone ‘Power’ store in Noida and introduced
a ‘Red-Concept’ store format that would house the latest premium collections with
a rich shopping ambience expected to enhance footfalls.
For Q4FY2018, there was signicant attention on fashion and casual collection
with new brand ambassadors: Smriti Mandhana for ‘Power ‘(Indian women’s
cricket team) and Kriti Sanon (Actress) who helped in strengthening the company’s
connect with the youth.
Aims to be a $1- billion
worth company
Exhibit 2: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 6323 6740 (6.2) 5980 5.7
Expenditure 5669 5779 (1.9) 5580 1.6
EBITDA 654 961 (31.9) 401 63.3
Depreciation 169 154 9.3 166 1.3
Interest 20 5 311.9 16 30.8
PBT 771 1063 (27.4) 507 52.2
Other Income 137 107 27.8 122 12.6
Ta x 250 381 (34.3) 147 69.8
PAT 485 705 (31.2) 392 23.8
Other Comprehensive Income (36) 23 (256.0) 32 (209.9)
Adjusted PAT 485 705 (31.2) 392 23.8
PAT B/F EO Items 771 1063 (27.4) 507 52.2
EBITDA Margin (%) 10.4 14.3 (390) bps 6.7 365 bps
EBIT Margin (%) 12.5 15.8 (333) bps 8.7 378 bps
Net Prot Margin (%) 7.7 10.5 (278) bps 6.6 112 bps
Source: Company, Karvy Research
Exhibit 3: Adjusted Financials
YE Mar (Rs. Mn) FY16 FY17E FY18E FY19E FY20E
Net Sales 24559 25043 26412 28657 31523
EBITDA 2758 2786 3513 4149 4490
EBITDA margin (%) 11.2 11.1 13.3 14.5 14.2
Adj. Net prot 2177 1594 2205 2642 2853
EPS (Rs.) 16.94 12.40 17.15 20.55 22.19
YoY growth (%) (5.9) (26.8) 38.4 19.8 8.0
Source: Company, Karvy Research
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Jun 04, 2018
Bata India Ltd
Exhibit 5: Bata - 10yr P/BV Band
Source: Bloomberg, Karvy Research
Exhibit 6: Nifty Consumption Index - 5yr P/BV Band
Source: Bloomberg, Karvy Research
Exhibit 4: Change in Earnings Estimates
YE Mar - Standalone (Rs. Mn)
FY19E FY20E
Old New % Change New (Introducing)
Net Sales 27297 28657 5.0 31523
EBITDA 3765 4149 10.2 4490
EBITDA Margin (%) 13.8 14.5 69 bps 14.2
Adj. PAT 2063 2642 28.1 2853
EPS (Rs.) 16.04 20.55 28.1 22.19
Source: Karvy Research
0
2000
4000
6000
8000
10000
12000
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep
-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
17.7x
14.7x
11.7x
8.7x
5.7x
0
200
400
600
800
1000
1200
1400
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-18
Price (Rs.)
11.5x
9.2x
6.9x
4.6x
2.3x
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Jun 04, 2018
Bata India Ltd
Financials
Exhibit 7: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Revenues 24559 25043 26412 28657 31523
Growth (%) (8.8) 2.0 5.5 8.5 10.0
Operating Expenses 21801 22258 22899 24508 27033
EBITDA 2758 2786 3513 4149 4490
Growth (%) (17.7) 1.0 26.1 18.1 8.2
Depreciation & Amortization 785 646 605 569 602
EBIT 2239 2600 3412 3580 3888
Other income 266 460 503 0 0
Interest Expenses 17 40 42 37 30
PBT 2969 2343 3370 3943 4258
Tax 792 749 1165 1301 1405
Adjusted PAT 2177 1594 2205 2642 2853
Growth (%) (5.9) (26.8) 38.4 19.8 8.0
Source: Company, Karvy Research
Exhibit 8: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Cash & Cash Equivalents 3425 5220 5912 8228 9410
Sundry Debtors 710 694 894 824 907
Inventory 6854 7138 7652 8018 8819
Loans & Advances 838 909 950 978 1026
Gross Block 6940 7857 8357 8757 9257
Net Block 3097 2736 2964 3024 3175
CWIP 134 242 121 127 134
Miscellaneous 2273 2292 2921 2920 3173
Total Assets 17331 19231 21414 24120 26644
Current Liabilities & Provisions 4093 4948 5608 5345 5831
Debt 0 0 0 0 0
Other Liabilities 1029 1040 1037 1058 1069
Total Liabilities 5121 5988 6645 6403 6900
Shareholders Equity 643 643 643 643 643
Reserves & Surplus 11567 12601 14126 17074 19102
Net Total Liabilities 12209 13243 14769 17716 19745
Total Networth & Liabilities 17331 19231 21414 24120 26644
Source: Company, Karvy Research
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Jun 04, 2018
Bata India Ltd
Exhibit 9: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
PBT 2969 2343 3370 3943 4258
Depreciation 785 646 605 569 602
Interest 17 40 42 37 30
Tax Paid (1077) (651) (1165) (1301) (1405)
Inc/dec in Net WC (409) 528 (700) (241) (1233)
Other Income (259) (439) (503) 0 0
Other non cash items 11 98 0 0 0
Cash ow from operating activities 2037 2565 1648 3007 2251
Inc/dec in capital expenditure (391) (477) (888) (628) (752)
Others (752) (1811) 0 0 0
Cash ow from investing activities (1143) (2288) (888) (628) (752)
Dividend paid (502) (540) (569) (530) (569)
Interest paid (17) (17) (42) (37) (30)
Cash ow from nancing activities (519) (557) (611) (566) (599)
Net change in cash 375 (280) 150 1812 900
Source: Company, Karvy Research
Exhibit 10: Key Ratios
YE Mar FY16 FY17 FY18 FY19E FY20E
EBITDA Margin (%) 11.2 11.1 13.3 14.5 14.2
EBIT Margin (%) 9.1 10.4 12.9 12.5 12.3
Net Prot Margin (%) 8.9 6.4 8.3 9.2 9.1
Dividend Payout Ratio (%) 38.4 28.2 20.4 17.0 15.8
Net Debt/Equity (x) (0.07) (0.05) (0.04) (0.15) (0.18)
RoE (%) 19.4 12.5 15.8 16.3 15.2
RoCE (%) 16.9 18.2 21.6 19.1 18.7
Source: Company, Karvy Research
Exhibit 11: Valuation Parameters
YE Mar FY16 FY17 FY18 FY19E FY20E
EPS (Rs.) 16.9 12.4 17.2 20.6 22.2
DPS (Rs.) 6.5 3.5 3.5 3.5 3.5
BVPS (Rs.) 190.0 206.1 229.5 275.7 307.2
PE (x) 24.7 59.9 44.6 37.3 34.5
P/BV (x) 2.2 3.6 3.3 2.8 2.5
EV/EBITDA (x) 9.4 16.9 13.8 11.2 10.2
EV/Sales (x) 1.1 1.9 1.8 1.6 1.4
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
6
Jun 04, 2018
Bata India Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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