What TV doesn't, print can't; we deliver.
What TV doesn't, print can't; we deliver.
Bata India’s Q2 performance demonstrated solid revenue growth but fell short on profitability, with EBITDA and PAT down by 8.1% and 18.9%, respectively, due to higher-than-expected costs.
NEW DELHI: Bata India’s Q2 performance demonstrated solid revenue growth but fell short on profitability, with EBITDA and PAT down by 8.1% and 18.9%, respectively, due to higher-than-expected costs. The footwear giant is strategically investing in premium and affordable products to drive long-term growth and profitability. However, increased raw material and operational expenses in Q2 have led to a downward adjustment in FY25 earnings estimates by 11.7%, although projections for FY26 and FY27 remain steady. Analysts maintain a “Buy” rating for Bata India with a target price of INR 1,882, based on a 47x FY27E P/E.
Strong Premium Segment Growth Drives Revenue
Bata India’s Q2 revenue rose 2.2% YoY, reaching INR 8,371 million, boosted by a strong premium segment. Although demand in the value segment (priced below INR 1,000) fell to 30% of total sales, the company saw a 16% YoY boost in eCommerce sales, particularly on Myntra with successful brand launches like Nine West. Power and Floatz brands posted YoY growth of 6% and 60%, respectively. Bata’s festival season strategy includes prominent brand collaborations, such as the Bata Red Label x *Emily in Paris* and Hush Puppies x *Peanuts*, to attract diverse customers. Analysts project an 8.5% revenue CAGR from FY24 to FY27 as Bata expands premium offerings, adds stores, and enhances its eCommerce footprint.
ALSO READ: X becomes Qatar’s top news app, leading both ‘free’, ‘grossing’ categories on App Store
Focus on Margin Recovery by FY27
Despite revenue gains, Bata’s EBITDA margin dipped 132 basis points to 20.9% and gross margin shrank 143 basis points to 56.6% due to higher franchisee costs and inventory clearance. With ongoing costs in IT and new store openings, Bata expects margins to improve gradually, targeting a 21.1% EBITDA margin in FY25, 23.7% in FY26, and 24.4% by FY27.
Store and Franchise Expansion to Fuel Growth
Expanding its footprint, Bata added 39 stores in Q2, achieving a 9.8% YoY growth and reaching a total of 1,955 stores. Franchise locations rose to 600, surpassing Bata’s initial target of 500 by 2024 and contributing 11-12% to retail revenue, while omnichannel sales add a further 5%. Bata also increased its multi-brand outlet reach to 1,560 towns, enhancing its presence across smaller markets.
ALSO READ: Nvidia hits $3.6 trillion market cap, surpasses Apple amid Trump re-election
Outlook and Investment Recommendation
With its emphasis on premiumization, strategic partnerships, and store expansion, Bata India remains poised for growth despite short-term cost pressures. Analysts reiterate a “Buy” rating with a target price of INR 1,882. However, they caution that increased competition and volume challenges may pose risks to Bata’s growth trajectory.
Prerna Jhunjhunwala is a research analyst with Elara Securities India Private Ltd.
