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Home >Markets >Mark To Market >Bata India’s Q1 is muted, stock still below pre-covid highs

Bata India Ltd’s shares touched a new 52-week high of 1755 apiece on Thursday on the National Stock Exchange after its June quarter results (Q1FY22). But note that the stock is still trading lower than its pre-covid highs seen in early 2020.

Q1FY22 results show the adverse impact of the second covid wave restrictions. Revenues have declined by 55% vis-à-vis the March quarter to Rs267 crore. “(This is) even as Bata didn’t really see a good recovery in Q4 (compared to other discretionary categories as well). Product mix would have continued to be unfavourable for the quarter given lower demand for formals (schools were largely closed and offices had strict operating restrictions)," said analysts from ICICI Securities Ltd in a report on 12 August.

Not a cakewalk
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Not a cakewalk

While revenues have almost doubled year-on-year, helped by a favourable base, sales are still 70% lower than Q1FY20. During Q1FY22, sales in retail outlets were primarily subdued thanks to the second wave of covid-19 infections and ensuing lockdowns. On the other hand, sales through ecommerce platforms were robust and saw an uptick despite the restrictions. Online sales now contribute to 15% of total sales in Q1FY22.

Overall, the company swung to operating losses from a profit in the March quarter. Bata’s loss at the earnings before interest, tax, depreciation and amortization (Ebitda) level stood at Rs31.5 crore in Q1 versus a profit of Rs112 crore in Q4FY21.

Dolat Capital Market Pvt. Ltd has downward revised its FY22E estimates to Rs11.3 (versus 19.3 earlier) to factor loss of revenues during Q1FY21 and resulting lower operating leverage. “However, we have broadly maintained our FY23E EPS estimates to factor in anticipated re-opening of malls, schools, offices in FY23E, favorable base, new advertising campaigns and increased e-commerce contribution," point out the analysts in a report on 11 August. EPS is earnings per share.

Gunjan Shah, chief executive officer, Bata India, said, “Since the ease in lockdown, footfalls in our retail outlets have started growing, signalling strong signs of recovery."

Analysts reckon the valuations of the Bata India stock are pricey. Therefore, unless the pace of growth picks up, it would be tough for valuations to sustain at such high levels.

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