Bata India hits new high on strong December quarter results

Bata store at Vasant Kunj, New Delhi. Photo: Sanjay K Sharma
Shares of Bata India hit a new high of Rs 1,235 apiece, up 4 per cent on the BSE in early trade on Wednesday, after the company reported strong growth of 51 per cent in net profit at Rs 103 crore in December 2018 quarter (Q3FY19). The footwear company had a profit of Rs 68 crore in the year-ago quarter.

Operational revenues grew 16 per cent at Rs 779 crore in Q3FY19 against Rs 674 crore in the corresponding quarter of previous fiscal. Ebitda (earnings before interest, taxation, depreciation and amortisation) margin improved 450 basis points to 21 per cent from 16.5 per cent.

Bata India surpassed its previous high of Rs 1,216 touched on February 8, 2019. In the past three months, the stock outperformed the market by surging 22 per cent, as compared to 3.4 per cent gain in the S&P BSE Sensex.

Bata India’s double-digit growth in revenues can be attributed to new consumer campaigns, launch of new Red concept stores, festive season shift and retail store expansion. The gross profit margin expansion of 350 basis points to 58.6 per cent can be attributed to increased contribution of premium products and new high ASP launches during the quarter. In addition, with strong sales growth, the operating leverage helped EBITDA margins to flourish, according to analysts at Dolat Capital.

Going ahead, the brokerage firm believes that Bata sales growth would continue to improve as the company has addressed most of the issues related to stock management in recent times. In addition, steps such as store renovations, online systems at store level and ongoing marketing campaigns are likely to benefit the company in the ensuing quarters. Moreover, premiumisation, cost-saving measures and GST rate change (18 per cent to 5 per cent for Rs 500 – Rs 1,000) are key triggers to accelerate profitability, it added.

At 09:39 am; Bata India was trading 3.4 per cent higher at Rs 1,230 on the BSE, against 0.36 per cent rise in the Sensex. The counter has seen huge trading volumes with a combined 1.59 million equity shares changed hands on the NSE and BSE so far.

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