Bata India Q3 FY 2018-19 Result Analysis

Bata India Ltd is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network. In last 4-5 months, the Bata India stock price has given returns of almost 40%-45%.

So, why is the stock performing so good? How were the Q3 Results of Bata India Ltd? Let’s analyze these things in detail:

Bata India Q3FY18-19 Results

In Rs. Cr Q3FY18-19 Q3FY17-18 YoY Growth
Sales ₹779 ₹674 16%
Operating Profit ₹164 ₹111 47.7%
Net Profit ₹103 ₹ 68 51.5%
  • The YoY growth in sales may not seem exciting but it is also not that bad.
  • When you compare the YoY growth of operating profits with its YoY growth of sales, then it can be understood the operating margins of the company have improved brilliantly.
  • The operating margins have increased to 21% in Q3FY18-19 from 17% in Q3FY17-18. This is the first time that the company’s margins have crossed the 20% mark.
  • The YoY net profit growth is very healthy.

Bata Stock Price Movement

Last quarter, that Q2FY18-19 the stock of Bata India saw a fall from around Rs. 1,100 to the levels of Rs. 850. The reason was that small cap and mid cap saw healthy corrections. Now, the stock of Bata India Ltd has been promoted to Mid cap from Small in the latest recategorization done by SEBI.

Currently, the Bata India share price is around Rs. 1,265, and the stock is trading with a PE of 55.72. The stock obviously looks expensive, but when you have such healthy numbers (the Q3 result above) then such valuations are justified.

Bata’s Price-to-Earnings-to-Growth (PEG) Ratio

Formula = P/E Ratio ÷ Growth of the Company

Now, the growth can be looked at from various parameters such as net profit, operating profit, sales, etc. Many argue that sales parameter should be considered, but we feel that it should be a balanced approach. One should consider sales growth, operating growth and even net profit growth, and then the look at what the PEG ratio looks like. So, if the P/E ratio is 55 and the growth is also 52%, the PEG ratio of almost more than 1 (52 ÷ 52) looks very positive.

Reasons behind the Growth

  • New Stores – Bata India opened 50 new stores. They have started a new red theme concept and opened up new premium stores. The company has also taken Kriti Sanon and Sushant Singh Rajput as their brand ambassadors. And this exactly how they have increased their operating margins by bringing a little premium feel to the brand. The company has almost 1,300 stores of itself, that is of Bata. And are present in more than 50,000 multi-brand stores.
  • Production Details – Bata India has the capacity to produce or sell 5 crore pairs of footwear, which is very huge. Bata is the largest player in the Indian footwear industry.
  • Customers – Bata India servers to 1.2 lakh customers every day. The company has very high reach among the people.

Summary

  • The Q3FY18-19 result of Bata India Ltd are very good and healthy.
  • The company has many positive reasons working in its favour.
  • No doubt Bata India has had a great quarter but will it able to sustain the same YoY growth.
  • If the company is able to give similar growths in the next quarter too, then such premium valuations given to Bata India Ltd may get justified.
Notes: –
  • Q3FY18-19 = Quarter of Oct-Dec of 2018
  • Q3FY17-18 = Quarter of Oct-Dec of 2017
  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • We are not in any way saying that this is a bad company, or the stock of this company is bad.
  • We are also not suggesting anyone to immediately go and buy this stock or invest in the stock markets.