Bata India: A Household Brand, That You Can't Ignore---

For Bata, 477-461 May Be A Very Good Demand Zone

It  may be one of the beneficiary of  the 7-th Pay Comm 
(low ticket purchase) & GST

CMP: 495

Either buy on breakout above 505 or in dips around 477- 461;

TGT: 532-550-580 (1-3M)

TGT: 622-748 (12-24M)

TSL<455

Note: Consecutive closing below 455 for any reason, Bata may further fall to 430*-400 & 390-374 zone and one may again accumulate there around 430, being another strong demand zone for better investment buying average.

Q2FY16 result of Bata was below street estimates and decline in OPM by 3% to 8.5% was also very disappointing. Analysts were expecting an OPM of around 11% in Q2.

In Q2, nearly all the cost components (raw material costs, rent etc) has increased quite a bit; but management was very optimistic about the Q2 result despite overall economic slowdown in India.

Looking ahead, Bata is taking necessary initiatives to expand its product offer, focusing on SSSG and strengthening of  its e-commerce business by offering 100 new footwear designs exclusively to attract a large consumer base.

With expected overall economic recovery in India in the coming quarters & improvement in consumer sentiment, we may see better performance of Bata in FY-17. Also, overall structure of 7-th Pay comm may boost lower ticket purchase to a great extent rather than big ticket purchase and Bata, being a house hold name having excellent brand recall & distribution network, may be one of the key beneficiary.

In footwear industry, there is good competition from unorganized sector having advantage of no need for pay any taxes (VAT/ED etc); i.e. they are operating in an "unaccounted money" atmosphere. Hopefully after implementation of GST and Govt's current initiative of "plastic/digital money" everywhere, may compel this unorganized sector to come into ambit of "tax/accounted money" system and the price differential between organized & unorganized sector will reduce to some extent.

This will be also good for Bata in the days ahead.

As par BG metrics and current market parameters :

 (on standalone TTM & FWD EPS basis)

Present median valuation of Bata may be around: 540 (FY-15/TTM)

Projected fair valuations might be around : 605-680-760 (FY:16-18/FWD)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	Low	High	Median	200-DEMA	10-DEMA
BATAINDIA	18.65	77.44	30	552.24	522.12	537.18	545.07	487.24

BATAINDIA

23.55

92.95

30

620.56

586.72

603.64

545.07

487.24

BATAINDIA

29.55

112.55

30

695.13

657.22

676.17

545.07

487.24

BATAINDIA

36.95

136.55

30

777.31

734.92

756.11

545.07

487.24

Analytical Charts: