Bata Share price today: Bata India Q3 FY21 revenues recovered to 74% of pre-COVID levels at Rs 614.7 cr. It grew by 67% qoq mainly on account of higher festive sales and target customer outreach. Sales through digitally enabled platforms like the Bata website, online marketplaces, Bata ChatShop, Bata Home Delivery and Bata Store on Wheels contributed over 15% of total revenues. In the institutional & distribution business, the company won orders to supply safety & industrial shoes to companies in the cement, steel & railways sectors as the economy started to open up. Share price of Bata India is down nearly 4% or Rs 60 at Rs 1508.

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Further, Bata continued expanding in smaller towns by appointing new channel partners. The company opened 45 new franchise stores in the quarter, taking the total to 221. Gross margins stood at 51.5% in Q3 FY21 versus 61% in Q3 FY20 affected by unfavourable mix as formals and fashion categories yet to revive. Sharekhan maintains Buy Rating on Bata India (Bata) with a revised price target of Rs 1765.

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Bata maintained its focus on cost saving measures through store rental optimisation and cutting down on discretionary spends. OPM stood at 19.1% in Q3 FY21 as against 31.7% in Q3 FY20. With a sequential recovery in sales, OPM improved from 4.9% in Q2 FY21. Focus on expanding the store base in tier 3/4 towns, sustained product launches/promotional activities, and emphasis on digital footprint bode well for the company from medium to long-term perspective. A strong recovery is anticipated in FY2022 while mid-teens growth is expected in FY2023. A recovery in sales and cost efficiencies would help Bata to post higher OPM in FY 2022-23.

Bata India Key positives:

Essentials categories bounced back leading to overall volumes reaching 88% of pre-COVID levels
Digital initiatives helped enhance revenue contribution from digital channels to 15% of revenues in Q3 from 10% in Q2
To respond to semi-urban demand, the company opened 45 franchise stores in Q3
Manufacturing picked up from January 2021 onwards, as demand picked up and inched closure to pre-COVID levels.

Bata India Key negatives:

Unfavourable mix resulted in gross margins standing at 51.5% versus 60.7% in Q3 FY20

Bata India Key risk:

If the lockdowns sustain and normalisation takes longer than expected, it will further affect second half of FY21 earnings due to sustenance of store closures, resulting in an overall earnings disruption for FY21