Bata ...thread

[RAJESH DESAI]

pfa

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CA. Rajesh Desai

[RAJESH DESAI]

Bata India | Highest ever quarterly sales growth; margin expansion continues :MF GlobalBata India Q4CY11 results were robust and were above expectations with

highest ever quarterly revenue growth of (30%) and EBITDA margin of 15.1%.
We also highlight that the company’s inventory levels have reduced by 2 weeks
YoY.
Highlights of the results:
» Topline driven by increase in volumes (as stated by the MD)
» We witnessed benefits of operating leverage from benefits of K-agent run
stores as EBITDA margins expanded by 100 bps YoY at 15.1% despite
increase in rentals as a % of sale.
» Gross margins compressed by 180 bps
» Reported PAT at Rs. 360mn against Rs 252mn (adjusted for one time gains)
last year, a jumped 43% from the earlier corresponding period.
» During the quarter, Company has added 67 new stores, which is the highest
ever quarterly store addition. The expansion drive saw stores opening
across metros like Delhi, Mumbai, Chennai, Hyderabad and Bangalore. It
also increased brand penetration in mini metros / tier II cities such as
Ambala, Anand, Bilaspur, Hissar, Bhopal, Kannur, Indore, Bareilly, Gaya etc.
» Effects of operating leverage evident on Employee costs and other
expenditure however gross margins contract for the third consecutive
quarter. Rental costs impact EBITDA for the fourth consecutive quarter.
Valuation: The stock trades at 16.5x CY13E EV/EBITDA (CY13E cash of Rs 4bn)
and 12.5x CY13E EV/EBITDA. We roll over our earnings model to CY13E We
marginally revise our estimates downwards for CY12E EBITDA margins to account
for gross margin contraction. The company’s CY13E EBITDA margins are at
17.7% and RoE at 30.5% (not adjusted for cash which is 40% of CY13E Balance
sheet) warrant valuations at 15x EV/EBITDA as other Consumer sector
companies with similar EBITDA margin and RoE profile trade at similar valuations..
Maintain our BUY rating and revise our target price to Rs 1,005.

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CA. Rajesh Desai

[RAJESH DESAI]

Dear Sir/Madam,

 

Bata India announced its Q1 FY13 results on 26 July 2012.

 

Q1 FY13 Result Analysis

The company’s Total Income increased by 17% YOY to INR507 crore YOY and its EBITDA increased by 23% YOY to INR86 crore. EBITDA Margin of the company increased from 16.10% to 16.95% YOY. Adjusted PAT increased by 28% YOY to INR53 crore. At the CMP of INR896, the stock is trading at a P/E of 31.5x its CY12E EPS of INR28.4. We maintain Hold at the current level.

 

DESCRIPTION	Jun-12	Mar-12	Jun-11	QOQ	YOY
Net Sales	507	408	433	24%	17%
Total Expenditure	421	346	363
EBIDTA (Excl OI)	86	62	70	39%	23%
EBITDA (%)	16.95%	15.16%	16.10%
Other Income	4	4	3
Operating Profit	90	66	72
Interest	0	0	0
PBDT	90	66	72
Depreciation	12	12	10
PBT	77	53	62
Tax	25	17	21
Profit After Tax	53	36	41	46%	28%
PAT (%)	10.4%	8.8%	9.5%
Equity Capital	64.26	64.26	64.26
Face Value (In Rs)	10	10.00	10.00
No. of shares	6.426	6.43	6.43
EPS	8.19	5.60	6.38	46%	28%

 

 

Regards,

 

Team Microsec Research


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CA. Rajesh Desai

[RAJESH DESAI]

PFA


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CA. Rajesh Desai

[RAJESH DESAI]

Bata plans Rs 100cr capex for FY13; co to open 150 stores

Footwear brand Bata India's net profit rose by 28.6% to Rs 52.6 crore in the quarter ended June. However, the company's sales growth was disappointing in the second quarter and Rajeev Gopalakrishnan, MD of Bata said sales were hit by a delayed monsoon.

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CA. Rajesh Desai

[Rajesh Desai]

Bata Indai (NB Insti)- Management Meeting: The management stated that BIL has been able to combat the slowdown. We believe that BIL is facing a slowdown since the past nine months and expect its growth to remain moderate for some more time. As stated by us in our reports dated 27 July 2012 and 1 November 2012, BIL stock was de-rated due to moderation in growth, and it achieved our TP of Rs786 factoring in the near-term slowdown. BIL trades at 13.9x/11.2x EV/EBITDA and 24.6x/19.5x P/E on CY13E/CY14E financials, respectively. We remain confident about the structural story of BIL and expect it to report a healthy net profit growth of 26.3% in CY14E and its valuation to get re-rated once the growth momentum resumes. Due to the likely EBITDA growth of 21.5% in CY14E compared to 17.9% expected in CY13E, we have increased our target multiple to 14.5x from 13.5x. We have rolled forward our target multiple to CY14 estimates and upgraded BIL to Buy from Sell with a revised TP of Rs1,000 (from Rs786 earlier) based on 14.5x EV/EBITDA.


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CA. Rajesh Desai

[Rajesh Desai]

Bata India (NB Insti)

• With 38bps/23bps rise in operating margin compared to our/Bloomberg consensus estimates, respectively, coupled with higher other income and a lower tax rate, net profit of Bata India (BIL) for 2QCY13 increased by 17.6% at Rs619mn, 5.7%/2.2% above our/Bloomberg consensus estimates, respectively.
• With the focus shifting from market penetration-driven growth to margin expansion, lease rentals increased by a mere 2.3% QoQ. Following control over lease rentals and better gross margin, we have increased our EBITDA margin estimates by 40bps/20bps to 15.4%/16.2% for CY13/CY14, respectively.
• Higher other income due to healthy operating  ash flow and a marginally lower tax rate lead to 8.2%/7.4% increase in our net profit estimates for CY13/CY14, respectively. BIL generated healthy operating cash flow of Rs905mn in 1HCY13 compared to our estimate of Rs1,398mn for CY13. Healthy cash generation and improving margin in the current environment, where discretionary spending is on the decline, calls for a premium valuation.
• We have increased our target multiple on BIL from 13.5x to 16.5x CY14E EV/EBITDA.
• We have upgraded the stock to Buy (from Hold) with a revised target price Rs1,064 (Rs865 earlier).

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CA. Rajesh Desai