Bata India Ltd: Safe Walk

May 2, 2015 . Equities Desk

Founded in 1931, Bata India Ltd is engaged in the manufacturing and retailing of footwear and accessories for women, men and kids. Having a retail network of 1,400+ stores, the company has a significant presence in almost all metros and towns. Through its manufacturing facilities in West Bengal, Bihar, Haryana, Karnataka and Tamil Nadu, the company produces some of the country’s well-known brands. In an effort to accelerate its growth trajectory, Bata India is continuously increasing its focus on tier III and tier IV cities where the potential for growth is significant.

Valuation and view

Given Bata India’s consistent efforts towards attracting new customers and retaining the existing ones, we remain positive on the growth prospects of the company in the long-term. With a massive restructuring exercise, Bata India has evolved from being a low growth, low-profit generating company to one that can boast on all key parameters, namely, growth, profitability and cash generation. The company’s investments in new sales channels, franchisee model in tier III and tier IV cities and launch of e-commerce model are steps in the right direction.

Considering the above aspects, we rate the stock as ‘BUY’ at a CMP of Rs 1,018.8, attractively placed at P/E of ~33.4x and ~25.4x, for FY16E and FY17E, respectively to arrive at a target price of Rs 1,221.7, with a potential upside of ~19.9% for the coming 12 months.

Research Report Bata India Ltd

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