Bata falls 3% after Motilal Oswal downgrades stock; sees 23% downside
Shares of Bata India fell 3 percent intraday on Friday as investors turned cautious after Motilal Oswal downgraded the stock.
The broking firm downgraded the stock to sell, with a target of Rs 578, a downside of 23 percent.
The brokerage highlighted how the company’s focus has been on product premiumisation. “The intent is to expand average realization through premiumization and increase the revenue contribution of premium products from 30% to 45% in FY18. However, with subdued growth in 1HFY18, we expect the ramping up of premium products’ contribution to get pushed to FY19, with marginal margin expansion of 70bp in FY18 to 12% and 100bp thereafter to 13% in FY19,” the brokerage said in a report.
Further, it added that even if the firm has been adding more stores, it has been underperforming on same store sales (SSS) growth – in 2QFY18, it posted SSS growth of 4%, pulling down the SSS growth for 1HFY18 to 6%.
“Considering subdued revenue growth in 1HFY18, we cut our revenue estimates by 4% for FY18 and by 6% for FY19. We keep our earnings estimates unchanged. We expect revenue CAGR of 9% and PAT CAGR of 19% over FY17-19,” the brokerage’s report added.
At 09:42 hrs Bata India was quoting at Rs 738.75, down Rs 9.65, or 1.29 percent, on the BSE. It touched an intraday high of Rs 744.75 and an intraday low of Rs 723.80.