Update on the Indian Equity Market:
On Thursday Nifty closed 0.35% lower at 11,896. Among the sectoral indices NIFTY Media (+0.7%), Metal (+0.7%), and Realty (+0.4%) closed higher. Pharma (-0.9%), IT (-0.7%), and Private Bank (-0.7%) closed lower. Hero Motocorp (-3.03%), Indusind Bank (-2.99%), and ICICI Bank (-1.62%) closed on a negative note. NTPC (+4.1%), Tata Motor (+3.1%), and Bharti Airtel (+2.9%) were among the top gainers.
Excerpts from an interview of Mr. Sandeep Kataria, CEO, Bata with CNBC-TV18 dated 20th October 2020:
● Speaking about demand, Mr. Kataria said things are much better as compared to the past 3-4 months.
● There is a pick up of demand MoM. The company expects to reach normal levels with the festive season coming in.
● Speaking about stores, he said almost all the stores are opened except a few isolated ones.
● People are getting back to the office. Delhi and Gurugram are the cities where traffic is visible.
● Demand for casual wear is consistent and washable slippers.
● Q1 was weak for the company as well as the industry. He expects that the company will reach pre-covid levels towards the end of the festive season.
● Speaking about stores, the company had negotiations with landlords which was helpful. The push of the franchise store in towns below 5 lakh population is showing a good trend and there are a lot of enquires.
● The biggest cost is rentals for the company and the company is taking measures to reduce it.
● The administration and travel costs are also looked closely.
● The company has a strong balance sheet and remain cash positive, there is no worry on that front.
● On post- covid scenario, he said the company is already working on E-commerce and the focus will continue.
● He said tier 2,3 towns are showing a quick bounce back as compared to urban.
Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Bata was ₹ 1,362 as of 22-October-2020. It traded at 182x/ 46x/ 38x the consensus Earnings per share estimate of ₹ 7.5/29.8/35.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Bata is ₹ 1293/- which implies a PE multiple of 36x on FY23E EPS of ₹35.9/-.
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