Citi initiates a sell call on Bata India; stock down 2%

Citi raised concerns about the company losing market share after its subdued performance in the April-to-June quarter.

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Bata India shares fell 2 percent in early trade after Citi initiated coverage on the footwear stock with a ‘sell’ rating, with a target price of Rs 1,310 per share. Citi raised concerns about the company losing market share after its subdued performance in the April-to-June quarter.

Bata posted a muted show in Q1FY2024 as footwear demand stayed subdued while the early start of the End of Season Sale hit margins. Gross margins for the company decreased 185 basis points year-on-year (YoY)  to 54.8 percent. And the EBITDA margin declined by 92 basis points YoY to 25.5 percent in the April-to-June quarter.

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Demand for mass products — which are products under Rs 1,000 — remained weak during the April-to-June quarter. However, the premium portfolio showed growth, said Bata India’s management. Bata India’s sneaker portfolio grew by 1.15 times on a YoY basis. While Floatz, another brand towards the premium side, grew 2.06 times on a YoY basis.

Citi also pointed out that Bata India’s revenue has grown at a CAGR of 4 percent in FY19-23, which is the lowest among its top four listed peers. Metro Brands’ revenue has grown at a CAGR of 15 percent over FY19-23, while Relaxo Footwears’ revenue has grown at a CAGR of 7 percent in the same period.

Bata India shares were down 1.11 percent at Rs 1681.95 at 14.49 pm on the National Stock Exchange.

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