The Bata India stock has clocked smart gains for its investors during the last two years amid aggressive growth plans adopted by the footwear manufacturer. The stock rose nearly 100% from Rs 526 level to the 1,041 level in trade yesterday. The mid cap stock has clocked 44.62% gains during the last one year and rose 38.81% since the beginning of this year. The stock hit its all-time high of 1,116 points on August 29, 2018.
Over the years, the firm has gone aggressive in expansion of its business and attracting new customers.
Bata India CEO and whole-time director Sandeep Kataria told Business Today the firm has been opening new stores during the last few years. It opened 100 plus stores in the last year and similar number are expected this year too. Besides, the company and company-operated stores, the firm has embarked on the opening of franchise stores as a second engine of growth in tier-three and four cities during the last one year. It is aiming to open 500 franchise stores over the last five to six years, Kataria said.
Earlier this year, Bata India launched Red Label collection in India to attract more youth customers with an eye on strong growth. Kataria said for the last seven to eight years, the company has been engaged in huge modernisation of stores, improvement in technology, improved experience for customers and much wider range of footwear to attract more youth and buyers for the product.
And the growth strategy seems to have reflected in earnings during the last two years.
Profit after tax rose to Rs 220.51 crore for the fiscal ended March 2018 compared to Rs 158.95 crore for the fiscal ending March 2017, signifying an increase of 38.73% on an year-on-year basis. Interestingly, net profit fell from Rs 217.39 crore for the fiscal ended March 2016 to Rs 158.95 crore. Earnings per share rose to Rs 17.16 per share for the fiscal 2017-18 compared to Rs 12.37 per share in last fiscal.
Rahul Sharma, senior technical research analyst at Equity99 said, "Bata India is the largest footwear retailer in India, offering footwear, accessories and bags across brands such as Bata, Hush Puppies, Naturalizer, Power, etc. Bata has over 1,400 retail stores across India. With implementation of GST, the Indian footwear industry which is mainly dominated by the unorganized sector is now shifting toward organized sector. This is beneficial for companies such as Bata. Its profit after tax rose 39% in FY19 & 37% in Q1FY19. Stock is trading at P/E of 55x on basis of TTM EPS. We expect 25% plus CAGR EBITDA growth in next 3 years."
The fact that Bata has zero debt on its books also seems to have worked in favour of the firm.
Contingent liabilities fell to Rs 46.05 crore for the fiscal year ending March 2018 compared to Rs 57.70 crore in the previous fiscal. A contingent liability is a potential liability which may arise in the future depending on the outcome of a specific event. It depends on a future event occurring or not occurring. In the fiscal ending March 2016, contingent liabilities stood at Rs 94.94 crore.
The number of mutual funds holding stake in the firm has increased from 77 to 92 during the last two quarters.
Number of FIIs holding stake in the firm have increased from 91 to 98 in June 2018.
Meanwhile, brokerage houses are positive on the growth prospects of the footwear firm.
Angel Broking in a report said," We expect Bata India to report net revenue compounded annual growth rate of 16% to Rs 3,555 crore over FY 2018-20E mainly due to increasing brand consciousness among Indian consumers, new product launches, higher number of store additions in tier II/ III cities and focus on high growth women's segment. Further, on the bottom-line front, we expect CAGR of 21% to Rs 323 crore over the same period on the back of margin improvement (increasing premium product sales)."
Nirmal Bang is positive on the advertising campaign conducted by the firm which is expected to drive higher footfalls.
The brokerage in a report said, "From less than 1% of sales being spent on advertisements, Bata India is targeting 2.5%-3% in FY19, which in our view could drive greater footfalls into its stores and also gradually change its appeal with younger consumers for the better. Our re-rating has been driven by expectation of BIL getting into a virtuous cycle where higher footfalls driven by advertising will lead to higher pick-up in same-store sales growth (SSG) and revenue mix shifting towards premium products which in turn will help fund higher brand spending while still driving some margin expansion. We believe it could help push BIL revenue growth to low-mid teens and earnings growth to mid-high teens on a sustainable basis."