Bata India gains nearly 50% so far in CY2019; should you buy the stock?

Shares of Bata India, the leading footwear retailer, climbed as much as 5.45 per cent to Rs 1,775.65 apiece on the BSE after the company posted a 29.96 per cent increase in consolidated net profit at Rs 71.30 crore for the September quarter. It had posted a net profit of Rs 54.86 crore in the July-September quarter a year ago, Bata India said in a BSE filing.

At 09:56 am, the stock was trading nearly 2.50 per cent higher at Rs 1,724.75 apiece on the BSE against 0.10 per cent fall in the benchmark S&P BSE Sensex. 

On a standalone basis, net profit grew 28.2 per cent to Rs 71.37 crore. 

Profit before tax (PBT) for the quarter under review stood at Rs 97.41 crore, up 14.6 per cent from Rs 84.98 crore logged in the year-ago period. 

Revenue from operations during the quarter under review rose 7.26 per cent to Rs 721.96 crore as against Rs 673.07 crore in the year-ago quarter.

 "While the market slowed down this year, Bata India continues to sustain its leadership in the retail sector with 7.3 per cent increase in the turnover and 28.2 per cent in profit over the previous quarter. Our momentum is driven on the back of continuous investment done over the past few years in areas of productinnovation, store renovation, customer experience and marketing," said Sandeep Kataria, Chief Executive Officer, Bata India.

Bata also employed multiple cost savings initiatives along with restructuring of contracts and long-term negotiations, thereby helping it realize better margins and profits, Kataria added.

Thus far in the calendar year 2019, shares of Bata India have outperformed the market and most of its peers by surging around 49 per cent as against a nine per cent rise in the Nifty50 index. Other footwear scrip that has given stellar returns during this period is Relaxo Footwears (up around 49 per cent). On the other hand, names such as Liberty Shoes have have tumbled around 24 per cent at the bourses. 

Should you buy the stock?

Analysts at ICICI Securities like the company's existing focus on improving brand imagery and launching new and trendy product ranges backed by aggressive campaigns.
 

"We believe that expansion of flagship stores with ‘experience centres’ (various foot care facilities, improved product assortment) improves confidence on Bata’s long-term ability to growth and premiumise," they wrote in a results review note dated November 14. 

The brokerage has maintained 'buy' rating on the stock with the target price of Rs 1,960 - nearly 16 per cent upside from Wednesday's closing price.

Brokerage Dolat Analysis & Research Themes (DART), too, believes that Bata’s sales will continue to rise, as the company has addressed most of the issues related to stock management. However, to grow on high base of FY19 would be a challenge for the company henceforth, it added.

It has maintained 'Accumulate'rating on the stock and advises investors to buy on dips. It has set the target price of Rs 1,788.