BATA INDIA. Buy,Add On Dips,

Transcription

1 BATA INDIA Buy,Add On Dips,

2 30, , , , , , , Mar Apr May-17 20, Jun Jul-17 27, Aug Sep Oct-17 24, Nov Dec Jan-18 25, Feb % 14. 0% 12. 0% 10. 0% 8.0 % 6.0 % 4.0 % 2.0 % 0.0 % Bata India Ltd. Bata India is the largest retailer and leading manufacturer of footwear in India and is a part of the Bata Shoe Organization. Incorporated as Bata Shoe Company Private Limited in 1931, the company was set up initially as a small operation in Konnagar (near Calcutta) in In January 1934, the foundation stone for the first building of Bata s operation - now called the Bata. In the years that followed, the overall site was doubled in area. This township is popularly known as Batanagar. Company four state-of-the-art production facilities located strategically across the country produce all kinds of shoes and accessories. Bata India Ltd command a strong pan-india retail presence with 1,293 stores across 500 cities. In recent times, they have been adding about large format stores every year. The Company also operates a large non retail distribution network through its urban wholesale division and caters to millions of customers through over 30,000 dealers. Company Synopsis: Bata India has launched its first exclusive store for Power its international sportswear brand. This first store is located at Noida,the 750 sq.ft, spacious hightech store, will cater to the increasing demand for active lifestyle with a range of shoes, apparel, bags, and accessories. Company have been following a dual strategy of driving same store growth and opening new stores in under-served locations and cities. During the last one year Bata has opened 100 new retail stores and 23 franchisee stores across India. The new stores are opened in untapped markets with a focus to get new customers. Young women and children are the new focus market for Bata India. Outlook: Global Footwear Market is valued at approx. USD 220 Billion and in expected to exceed USD 260 Billion by 2023, growing at 2.5% CAGR, Global Footwear Market is approx. 16 Billion pairs. India is the second largest producer of footwear in the world, next to China and has an ever-growing domestic market. Annually, India produces about 2.5 Billion pairs and it is estimated that production of footwear will exceed 4 Billion pairs by Bata India has done expansion by adding 100 new retail stores and 23 franchisee across India in FY 17, Company plans to add around 100 new retail stores and 50 new Franchisee stores in the current year to increase its presence in the Malls, High Street Markets and in the Tier-2 and Tier-3 cities across India. India is likely to become the most important market for Bata Shoe Organization (BSO) by Bata Shoe Organization, expects India to be number one in terms of turnover, surpassing Italy this year. Bata is also focusing on increasing its online presence through innovations to provide a user friendly shopping experience on mobile application and websites. Bata plans to expand its online presence via, tie-up with payment banks and increasing the presence of product offerings through partner websites. In FY17, it sold 6.3 lakh pairs of footwear through online channel and achieved revenue of 692 million. This will help Bata to grow their top line. Valuation: On our valuation front at CMP of Rs.730, the company is trading at a P/E multiple of 45.2x which is at a premium as compared to the average P/E multiple of 42.8xand EV/EBIDTA multiple of 30.6x which is at premium as compared to average EV/EBIDTA multiple of 20.6x.Looking a good potential in company Revenue and EBIDTA of the company is expected to grow.after considering all these factors and high probability of strong growth in the future we recommend a BUY,ADD ON DIPS rating for this stock. Financial Snapshot: Particulars (Rs. Mn) FY15 FY16 FY17 FY18E FY19E Revenue from operations 27, , , , ,866.0 EBITDA (Excl OI) 3, , , , ,934.0 EBITDA Margin (%) 13.4% 14.3% 10.3% 13.0% 13.6% PAT 2, , , , ,572.0 NPM (%) 8.5% 8.9% 6.3% 8.5% 8.9% P/E ROE 12% 16.3% 17% EPS EV/EBITDA March 30, 2018 Rating Matrix CMP Rs.730 Rating Buy, Add on dips Holding Period Months Current Level Investment 52 week H/L Rs833-Rs510.5 Face value Rs5.0 Upside potential 20-25% Sector Category Shareholding Pattern Particulars Dec 17 Sep 17 Jun'17 Promoter 53% 53% 53% FPIs 7.2% 8.7% 6% Insti. 24.2% 22.8% 24.6% N. Insti. 15.6% 15.5% 16.4% Relative Capital Market Strength 1.70 Quarterly Snapshot: Particular (RS. Q3FY18 Mn) Footwear Mid cap F&O Stock Yes Risky Level 900 Safe level % Bata Ltd 14.9% 13.4% Sensex 14.3% FY13 FY14 FY15 FY16 FY17 Revenue EBIDTA margin Q3FY % Change (YoY) Total Revenue 6,740 6, % EBITDA (Excl OI) 1, % EBITDA Margin (%) 16.5% 12.3% - PAT % NPM (%) 10.1% 5.9% - Source: Choice Research/ Annual reports; Financial data-ace equity

3 Peer Comparison: Companies CMP ROE (TTM) 12MR(%) M. Cap (Rs. Mn) EPS (TTM) BVPS EBIDTA Margin (%) NPM (%) Bata India Ltd % % 8.4% Liberty Shoes Ltd % % 1.3% Mirza International Ltd % % 7.6% Khadim india Ltd % % 5.0% Relaxo Footwares Ltd % % 7.4% Average % % 5.9% Companies P/E (x) P/Bv (x) P/Sales(x) EV/EBIDTA (x) Financial Snapshot: Particulars (Rs. Mn) CY12 CY13 FY15(15 M) FY16 FY17 Revenue from operations 18, , , , ,043.4 Gr (%) 19.1% 12.1% 30.5% -10.3% 2.0% EBITDA (Excl OI) 2, , , , ,785.8 EBITDA Margin (%) 14.7% 14.4% 12.2% 11.2% 11.1% PAT 1, , , , ,589.5 NPM (%) 9.2% 9.1% 8.5% 8.9% 6.3% Net Worth 6, , , , ,243.2 Total Assets 11, , , , ,321.4 Debt Cash flow from Operations 1, , , , ,565.1 D/E (x) Current Ratio (x) Profitablity ratios (%) ROCE (%) 32.0% 28.9% 24.2% 16.1% 16.1% ROE (%) 24.6% 22.7% 21.9% 17.8% 12.0% ROA (%) 15.2% 13.8% 14.3% 12.5% 8.2% Efficiency ratios (x) Receivable days Inventory days Payable days D/E PAT(Rs. EBIDTA(Rs. Mn) (TTM) Mn) (TTM) Sales (Rs. Mn) (TTM) Bata India Ltd , , ,742.6 Liberty Shoes Ltd ,973.9 Mirza International Ltd , ,356.8 Khadim india Ltd ,212.5 Relaxo Footwares Ltd , , ,113.8 Average , ,879.9 Source: Choice Research/ Annual reports; Financial data-ace equity

4 Key Brands Of BATA : Bata : Bata, as the mother brand, represents the myriad of things it has to offer to its customer. The brand stands for contemporary, trendy, colorful and youthful footwear destination. With comfortable shoes and stylish accessories for the entire family on offer, one can find stirring and surprisingly affordable fashion at every Bata store. Naturalizer : In 1927, Caleres, Inc. launched a women s footwear line with the radical idea of combining current fashion with comfort features. Naturalizer symbolized what modern women had achieved. Weinbrenner : The Weinbrenner brand line is made up of leather shoes and boots, low, mid and high cut and it was built to suit the true outdoor personalities. Weinbrenner carries the true essence of nature, travel, leisure and casual time out. Hush Puppies : A timeless brand, first created in America, to mark the rapidly changing lifestyle which was moving to comfortable, stylish and luxury living from a conservative culture. The brand and its basset hound mascot was the way to break the norm. Bata Comfit : Bata comfit is a comfort shoe brand that offers comfort, quality and style at wow prices. Bata Comfit presents a range of styles with comfort technologies in the outsoles and insoles that gives best comfort and ergonomic fitting in a shoe. Bata Comfit focuses on young working women and men between the age group of yrs. Bubblegummers : Bubblegummers is for fast growing feet of India s future. With their bright colors and multitude of trendsetting designs, it is little surprise that they are the favorites among these young citizens. The offbeat, distinctive styles and extra breathing space for the little feet allow for added comfort to their growing feet. Bubblegummers offers footwear in three categories namely Baby (0-12 months), Toddler (2-5 years) and Junior (6-9 years). Power : Launched in 1972, Power continues to spark an emotional connect with customers. The brand provides athletic footwear at an affordable price. Power brand stands for durability, trendiness, responsiveness, performance and value. Focus On Young Women And Children Young women are the new focus market for Bata India this year. The first step was to sharply define the audience and understand her aspirations so as to tailor-make the offering to excite and entice her. This has helped shape the company new brand manifesto to celebrate the modern woman. Company new television campaign of Bata Me. And comfortable with it has been launched, highlighting the brand s admiration for women in a very special way and presenting a glimpse of the transformation in Bata s image and product line. At the product level women focus is supported through their latest Bata Insolia range of heels, with technology that enables women to walk taller, walk further. Leveraging on the patented technology of Insolia owned by American company HBN Bata s new line of heels can be worn three times longer than regular heels and reduce the pressure on the front of the foot by almost 30%. This is a benefit that no other brand can claim and women customers are loving it. But it s not just the women s category which has kept attention, the children s category is also growing at a very fast rate. and offers a big opportunity for growth. Company have made concrete plans to corner a major share of this market and have built a wide portfolio covering different occasions like school, sports, outdoor, indoor, etc. under Bubblegummers and Disney brands. The children s category, which has been the legacy of Bata, will be seeing further expansion in the coming times. Digital Multi-Channel Business: Company s online business has registered a good growth during the year under review. Bata India sold more than 6.3 lacs pairs of footwear through online channels and achieved a turnover of Rs.692 Million. Company s e-commerce presence has penetrated in more than 750 cities and towns across India. Company s e-commerce Division mainly focused on increasing its customer database by reaching out to new set of target audience and also establishing successful association with many reputed Companies and banks, e.g., HDFC Bank, Standard Chartered Bank, State Bank of India, Deutsche Bank, Samsung, Spice Jet Airlines, etc. Such alliances helped the Company to increase its brand awareness and customer database. Company s products continued to be sold through its partners websites including Amazon, Myntra, Jabong, Flipkart, etc. Company has launched a Click and Collect service for its Stores in Delhi NCR Region. The customers can now shop the entire range of products available online with the click of a button and have their preferred footwear or accessories delivered to the local Bata retail store of their choice. Bata India has also launched Bata Mobile Application with interactive user-interface which has also been well accepted in the market. Property Details: Cost or Valuation Freehold Land Buildings Lease Hold Improvements At 1 April Additions Disposals At 31 March Additions Disposals At 31 March

5 Choice s Rating Rationale The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral. Don t be an Investor by Force, Be an investor by CHOICE Create a Wealth Building Portfolio with the help of CHOICE Fundamental Research. CHOICE Fundamental Research will handpick stocks for you to invest in an oversold market by helping you build positions in heavily beaten down fundamentally strong stocks. Opportunities to invest in fundamentally strong stocks at a low arise only 2-3 times in a full year cycle. Investors are advised to sell the stock if the recommended upside potential achieves. If recommended upside potential remains under-achieved, investors are advised to consider the update report on suggested stock. OUR TEAM Fundamental Research Team Name Designation id Contact No. Sunder Sanmukhani Head-Fundamental Research sanmukhanis@choiceindia.com Satish Kumar Research Analyst satish.kumar@choiceindia.com Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com Aman Lamba Research Associate aman.lamba@choiceindia.com Dhruv Thakkar Research Associate dhruv.thakkar@choiceindia.com Shrey Gandhi Research Associate shrey.gandhi@choiceindia.com Rahu Agarwal Research Associate rahul.agarwal1@choiceindia.com customercare@choiceindia.com 4

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