Firstcall-Bata

8/8/2019 Firstcall-Bata

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Stock DataSector Footwear

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 316.50/146.25

Volume (2 wk. Avg.) 229000

BSE Code 500043

Market Cap (Rs.In mn) 19166.74

Financials(Rs.in.mn) CY09 CY10E CY11E

Net Sales 10919.1 12229.4 13819.3EBIDTA 1322.5 1561.3 1745.4

PAT 672.2 778.0 877.8

EPS 10.46 12.11 13.66

P/E 28.51 24.64 21.83

Bata India Ltd BUYF

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SYNOPSIS Bata India manufactures different types of

footwear including rubber/canvas footwear,

leather footwear and plastic footwear. Bata

also markets apparel under the brand

names of `North Star`, `Power` and

`Ambassador`.

During this year, the Company opened 69new Bata stores, which are all in large

format with an average size of over 3000square feet.

During the quarter, Bata India was chosenby consumers as Indias Most Preferred

Exclusive Retailer and received this award

under the prestigious CNBC AWAAZ

Consumer Awards 2010.

Bata continued to focus on continuousimprovement of its shoe designs for the

youth and women segments.

Net Sales and PAT of the company areexpected to grow at a CAGR of 12% and 15%

over 2008 to 2011E respectively.

1 Year Comparative Graph

Bata India Ltd BSE SENSEX

V.S.R. Sastry

Equity Research [email protected]

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

[email protected]

C.M.P: Target Price:Rs.298.25 Rs.345.00

Share Holding Pattern

August 11th, 2010


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Peer Group Comparison

Name of the company CMP(Rs.)Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%

Bata India Ltd 298.25 19166.74 12.11 24.64 5.10 30.00

Mirza International Ltd 16.10 1492.60 2.65 6.08 1.09 10.00

Liberty Shoes 103.90 1770.50 5.76 18.04 1.34 0.00

Crew Bros Products 114.80 1471.50 17.67 6.50 1.09 0.00

Investment Highlights

Results Updates (Q2 CY10) (Standalone)For the second quarter, the top line of the company increased 14%YoY and stood

at Rs.3512.03mn against Rs.3089.96mn of the same period of the last year. The

bottom line of the company for the quarter stood at Rs.259.05mn from

Rs.183.48mn of the corresponding period of the previous year i.e. an increase of

41%YoY.


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EPS of the company for the quarter stood at Rs.4.03 for equity share of Rs.10.00each.

Expenditure for the quarter stood at Rs.3053.81mn, which is around 11% higher

than the corresponding period of the previous year. Raw material cost of the

company for the quarter accounts for 16% of the sales of the company and stood

at Rs.577.50mn from Rs.600.87mn of the corresponding period of the previous

year i.e., a decrease of 4%YoY. Employee cost increased 8%YoY to Rs.465.70mn

from Rs.429.88mn. and accounts for 13% of the revenue of the company for the

quarter.


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OPM and NPM for the quarter stood at 13% and 7% respectively from 11% and6% respectively of the same period of the last year.

Step out in style this monsoon season with Bata

Bata India Ltd, the name synonymous with footwear has launched a new range of

vibrant footwear for the monsoon season. The colorful collection has a range of

vibrant jelly bellies, trendy ballerinas, studded slippers and comfortable flip flopsfor those who do not want to compromise on fashion and style this monsoon.

Restructured its Agreement

Bata India Ltd. (BIL) had, in 2005, established a Joint Venture Company with

Calcutta Metropolitan Group Ltd (CMGL) on a 50:50 shareholding basis. The

objective of the Joint Venture Company was to create an integrated township thatwill serve as an economic catalyst for the region.


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Company Profile

Bata India is the largest retailer and leading manufacturer of footwear in India and is

a part of the Bata Shoe Organisation.

Incorporated as Bata Shoe Company Private Limited in 1931, the company was set up

initially as a small operation in Konnagar (near Calcutta) in 1932. In January 1934,

the foundation stone for the first building of Bata's operation - now called the Bata.

This township is popularly known as Batanagar. It was also the first manufacturing

facility in the Indian shoe industry to receive the ISO: 9001 certification.

Bata operates 5 manufacturing plant in india, sells through over 1200 retail stores

and finally serves over 120000 customers every day. The company currently sells over

45 million pairs of shoes every year and has an annual sales turnover of more than Rs

8000 million (USD 178 million).

Facilities

The company has five manufacturing facilities in the country. They are locates in the

following locations: Batanagar (West Bengal), Bataganj (Bihar), Faridabad (Haryana),

Peenya (Karnataka), Hosur (Tamil Nadu). At all its manufacturing facilities the

company produces quality leather, rubber, canvas and PVC shoes in wide-ranging

designs and styles at affordable prices. Bata India has an in-house tannery at

Mokamehghat in Bihar, which is the second largest in Asia.

Company products

Bata India is providing variant numbers of products are as follows:

Sandals

Closed shoes

Hawai

Canvas shoes

Sandak

Batalite


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Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) CY08 CY09 CY10E CY11E

Description 12m 12m 12m 12m

Net sales 9874.35 10919.18 12229.48 13452.43

Other income 107.13 81.56 93.79 98.69

Total Income 9981.48 11000.74 12323.28 13551.12

Expenditure -9007.99 -9678.16 -10761.94 -11824.69

Operating profit 973.49 1322.58 1561.33 1726.43

Interest -65.08 -40.72 -29.31 -45.75

Gross profit 908.41 1281.86 1532.02 1680.68

Depreciation -190.01 -279.23 -335.08 -331.73

Profit Before Tax 718.40 1002.63 1196.95 1348.96

Tax -111.03 -330.36 -418.93 -431.67

Profit After Tax 607.37 672.27 778.02 917.29

Equity capital 642.60 624.64 642.64 642.64

Reserves 1891.72 2338.44 3116.46 3994.27

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 9.45 10.76 12.11 13.66


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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 31-Dec-09 31-Mar-10 30-Jun-10 30-Sep-10E

Description 3m 3m 3m 3m

Net sales 2886.45 2615.70 3,512.03 3336.43

Other income 39.06 8.63 14.74 14.00

Total Income 2925.51 2624.33 3526.77 3350.43

Expenditure -2433.33 -2347.12 -3,053.81 -2919.37

Operating profit 492.18 277.21 472.96 431.06

Interest -9.19 -2.92 -2.21 -7.33

Gross profit 482.99 274.29 470.75 423.73

Depreciation -96.41 -63.92 -73.88 -83.75

Profit Before Tax 386.58 210.37 396.87 339.98

Tax -132.56 -67.07 -137.82 -117.29

Profit After Tax 254.02 143.30 259.05 222.69

Equity capital 642.64 642.64 642.64 642.64

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 3.95 2.23 4.03 3.47


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Key Ratio

Particulars CY08 CY09 CY10E CY11E

No. of Shares(In Million) 64.26 62.46 64.26 64.26

EBITDA Margin (%) 10% 12% 13% 13%

PAT Margin (%) 6% 6% 6% 6%

P/E Ratio (x) 31.56 28.51 24.64 21.83

ROE (%) 24% 23% 21% 19%

ROCE (%) 6% 6% 6% 6%

EV/EBITDA (x) 11.11 7.64 13.75 13.73

Debt equity ratio 18% 8% 6% 4%

Book Value (Rs.) 39.44 47.44 58.90 73.18

P/BV 4.27 6.43 5.10 4.13


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Charts:

Net sales & PAT

P/E Ratio (x)


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P/BV (X)

EV/EBITDA(X)


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Outlook and Conclusion

At the market price of Rs.298.25, the stock is trading at 24.64 x and 21.83 x for

FY10E and FY11E respectively.

On the basis of EV/EBDITA, the stock trades at 13.75 x for FY10E and 13.73 x

for FY11E.

EPS of the company is expected to be at Rs.12.11 and Rs.13.66 for the earnings

of FY10E and FY11E respectively.

The companys net sales and net profit are expected to grow at a CAGR of 12%

and 13% over CY08 to CY11E.

During the quarter, Bata India was chosen by consumers as Indias Most

Preferred Exclusive Retailer and received this award under the prestigious CNBC

AWAAZ Consumer Awards 2010.

We expect that the company will keep its growth story in the coming quarters

also. We recommend BUY in this particular scrip with a target price of

Rs.345.00 for Medium term investment.

Industry Overview

Footwear Industry

The Footwear Industry is a significant segment of the Leather Industry in India. India

ranks second among the footwear producing countries next to China. The industry is

labour intensive and is concentrated in the small and cottage industry sectors. While

leather shoes and uppers are concentrated in large scale units, the sandals and

chappals are produced in the household and cottage sector. India produces more of

gents. Footwear while the world.s major production is in ladies footwear. In the case of


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chappals and sandals, use of non-leather material is prevalent in the domestic

market. The major production centers India are Chennai, Ranipet and Ambur in Tamil

Nadu, Mumbai in Maharastra, Kanpur, Jalandhar, Agra and Delhi.

According to industry reports, the Indian footwear industry was said to be worth $1.48

billion in 2008. The country produces over two billion pairs of different categories of

footwear and nearly 95 percent of its production goes to meet its own domestic

demand. The export is targeted to reach $3.43 billion in 2008-09, and is expected to

reach $4.53 billion by 2010-11. India exports footwear to around 30 countries.

Retail Industry

Retail Sector is the most booming sector in the Indian economy. Some of the biggest

players of the world are going to enter the industry soon. It is on the threshold of

bringing the next big revolution after the IT sector. The sector contributes 10% of the

GDP, and is estimated to show 20% annual growth rate by the end of the decade as

against the current growth rate of 8.5%.

Led by the rising purchasing power, changing consumption patterns, increased access

to information and communication technology and improving infrastructure, the rural

retail market is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43

billion by 2015. As per the National Council of Applied Economic Research (NCAER)

reports, there are 720 million consumers across 6, 27,000 villages in rural India.

India's rural markets offer a sea of opportunity for the retail sector. The urban-retail

split in consumer spending stands at 9:11, with rural India accounting for 55 per cent

of private retail consumption. Rural India accounted for almost half of the Indian retail

market, which was worth about US$ 273.64 billion in September 2008. With most of

the retail markets getting saturated in tier-I and tier-II cities, the next phase of growth

is likely to be seen in the rural markets.


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Firstcall India Equity Research: Email [email protected]

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