We maintain a ?buy? rating on Bata India with a target price of R1,180 a share, valuing the stock at 25x CY15 EPS of R47. We believe Bata is strongly placed given its aggressive store expansion plans, new investments in marketing and expansion in new product segments in women, kids and accessories.
We cut our earnings estimates mildly (4.8% cut for CY14 EPS and 2.3% cut for CY15 EPS) to reflect lower growth and margins in this quarter. At the current market price, the stock trades at 28.6x and 22.7x CY14 and CY15 EPS, respectively.
Bata reported a revenue of R495 crore (versus estimate of R515 crore) against R453 crore in Q1 FY13, marking a y-o-y growth of 9.2%. Even as growth missed our estimates this quarter (9.2% against 13.5% expected), we believe Bata is largely on track to achieve our full-year topline growth assumptions led by higher store openings (~40-50 net store openings expected in CY14 compared with 30 in CY13) as well as new marketing initiatives.
This quarter, Bata unveiled its 360-degree integrated marketing campaign, ?Where Life Meets Style? and has spent R3 crore (0.6% of revenues) towards the same. We remain enthused by Bata?s marketing investments which in our view will result in better sales growth.
Motilal Oswal
