85% of stores are open – Bata IndiaAniket Khanolkar
Update on the Indian Equity Market:
On Friday, Nifty closed 1.1% lower at 11,178. Among the sectoral indices PSU banks (-2.3%), Auto (-2.6%) and Bank (-2.3%) closed lower. Pharma (+1.4%) and Metal (+1.1%) closed on a positive side. Eicher Motors (-7.2%), Tata Motors (-4.8%) and M&M (-3.3%) closed on a negative note. JSW Steel (+2.6%), Coal India (+2.3%), and Sun Pharma (+2.0%) were among the top gainers.
Excerpts from an interview of Mr. Ashwani Windlass, Chairman, Bata India with Business Line on 13th August 2020:
• The market place is still uncertain. There are intermittent lockdowns happening and the pandemic is surging in different places.
• Consumers are still not going out as they use to go before and that puts a question in terms of demand.
• Categories like sports, chappals, sandals and casuals are more popular and are moving faster, as opposed to formal footwear.
• This behaviour is also justifiable with the current scenario as there are not many social gatherings and people are not going to offices.
• The company is responding to the trends through offerings in stores and also on digital campaigns.
• Markets are opening up but the footfall is less. Factories are also working with staff limitations.
• Key metros like Delhi, Mumbai, Chennai are showing positivity.
• The company is hopeful that after the current ‘End of Season’ sale, some demand will be back in festival season
• Tier-I towns in India, including metros, are more congested, and they witnessed a different level of surge first. Now, the spread is into tier-II or tier-III towns. For example, the tier-II towns in Karnataka and Kerala were doing well before the surge happened there.
• The impact in smaller cities will not be as much as what it is in the metros that has the bulk of the demand.
• At this moment, Bata is supplying what customer wants.
• On new store openings, Bata adds 50 retail outlets which are company-owned and at least 50 which are franchisee-owned in a normal year. However, this year the company will focus on cash conservation and look for franchisees.
Consensus Estimate: (Source: market screener & Investing.com websites)
• The closing price of Bata India was ₹ 1,234/- as of 14-August-2020. It traded at 218x/40x/34X the consensus earnings per share estimate of ₹ 5.6/30.5/35.9 for FY21E/FY22E/FY23E respectively.
• The consensus average target price for Bata India Ltd is ₹ 1,296/- which implies a PE multiple of 36x on FY23E EPS of ₹ 35.9/-.
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