85% of stores are open – Bata India

85% of stores are open – Bata India

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/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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