Bata India Shares Fall As Analyst Dubs Recovery From Pandemic 'Underwhelming'

Bata India Ltd.’s share fell by 1.6% when markets closed on Wednesday after the domestic footwear giant continued its poor performance streak in the December quarter for the 2023 financial year.

What Happened? Bata India’s shares took a plunge on Wednesday, recording a new 52-week low of ₹1,464.60 after the company failed to meet the expectations of analysts, with ICICI Securities going on to label the footwear company’s rebound from pre-Covid levels as “underwhelming.”

The team at ICICI Securities led by Varun Singh, has maintained its ‘Hold’ rating for the stock, revising its price target from ₹1,700 to ₹1,500 after cutting Bata’s earnings estimates by 17% for FY23.

The brokerage highlights that Bata's revenue growth of 2.8% on a three-year compound annual growth rate (CAGR) basis is poor.

"We note while the headline recovery is coming out to be slightly weak, the same is on the back of multiple initiatives which will yield results in the medium-term,” said the analysts.

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Bata's Q3 margin performance wasn’t all that bad per its Q3 earnings report. Gross margin rose to 54.8% year-on-year, which was still below the company’s pre-Covid level (Q3FY20) reading of nearly 61%.

The team at ICICI Securities notes that Bata’s strategy of increasing the share of premium products would aid the margin going forward.

"We believe, while Bata's focus on premiumization, improving brand perception and expanding distribution are steps in the right direction, there will be challenges along the way,” said analysts at ICICI Securities.

"That said, the outcome of improving execution will take some time with not so supportive macro environment,” they added.

The footwear company’s poor form post-Covid was also brought to notice by investor Safir Anand who used the poor performance to highlight how he believes that “investing is never about knowing everything.”

Anand said this referring to a media report from May 2022 that spoke about how Indian footwear makers were set to rake in huge sales figures in upcoming quarters once markets opened after the pandemic.

Price Action: Bata India Ltd. shares were trading 1.17% lower at ₹1,483.50 when markets closed on Wednesday.

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