Store augmentation to augur growth… • Bata India :: ICICI Securities, report link

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Bata India - TP:INR975 Buy :: Motilal Oswal

All the right steps
Expect strong earnings and growth visibility
 Restructuring leads to sales CAGR of 14.7% over CY05-12, with EBITDA and PAT growth
of 47.6% and 51.6%.
 Focus on aggressive growth by expanding presence in Tier II, III cities and rural India.
 Outsourcing, K Stores expansion to contain employee cost; Margins set to increase.
 Bata India (BATAIN) trades at a PE of 26.4x/20.8x/16.5x CY13E/14E/15E EPS. We value
the stock at 25x CY14E EPS and arrive at a target price of INR975, with a Buy rating.

Bata India -Transformation delivering results! :IDFC research

We interacted with the senior management of Bata India (Bata). The company is the largest footwear retailer in India
with 1340 stores across the country. From being a predominantly lower-end/ men’s footwear retailer, Bata has
transformed itself to cater to a wider consumer set in terms of gender (increasing revenue share of women and
children’s footwear) and income group (expanding the premium range). This shift in strategy has led to accelerated
growth and sharp improvement in profitability (margins doubled in the past four years). Bata’s increasing scale, focus
on enhancing the premium portfolio and aggressive store expansion as also refurbishment plans point to a promising
growth outlook. Over 60% of the Rs200bn Indian footwear market is unorganized, with rural India accounting for 75% of
the consumption. This implies huge potential in terms of conversion from unorganized to organized segment and
premiumisation. With its unmatched scale and reach, Bata is likely to be the biggest beneficiary of this opportunity
provided it remains relevant to an increasingly younger consumer profile. The stock trades at 23x CY11 earnings.

Bata India -Focus on Premium Portfolio To increase market penetration:: Nirmal Bang

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Bata India | Highest ever quarterly sales growth; margin expansion continues :MF Global

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Stock Strategy: Short Reliance Ind, Bata India :: Business Line

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Short strangle on Reliance Ind may pay

Reliance Industries: The outlook remains negative for Reliance Industries. Immediate resistance appears at Rs 735 and the support at Rs 686. A close below the support could push the stock towards Rs 589. Key resistances are at Rs 825 and Rs 941.

F&O pointers: Reliance Industries witnessed unwinding of close to 4 lakh shares in open interest positions on Friday. This indicates that traders are not willing to carry over their positions. Option trading also indicates negative bias, as puts shed open interest positions.

Strategy: Traders can consider a short strangle on Reliance Industries. This can be initiated by selling 680 put and 720 call. The options closed at Rs 10.85 and Rs 7.45 respectively.

Short strangle strategy is best suited when one expects the underlying equity to move in a narrow range.

While the maximum profit is the premium collected (roughly about Rs 4,500), the loss could be unlimited if Reliance Industries breaches past the Rs 680-720 band. Maximum profit occurs if the underlying of the stock remains between these strikes.

But note that writing (selling) options involve higher margin commitments. So this strategy is best suited for traders, who can bear that risk. Consider this strategy for two weeks.

Bata India: The long-term outlook remains positive for Bata India as long as it stays above Rs 675. However, the stock could face some pressure going forward in the immediate-term. It faces resistance at Rs 863 and support at Rs 816.

A close below Rs 816 could drag Bata India to Rs 765. If the stock sustains above Rs 775, it has the potential to reach new heights. In that event, Bata can touch Rs 1,025, its next resistance level according to Fibonacci projections.

F&O pointers: The Bata India futures shed open interest despite scoring handsome gains on Friday, signalling negative bias. Options are not active.

Strategy: Consider shorting Bata India with a tight stop-loss at Rs 863 (spot price on a closing day basis) for an initial target of Rs 765. If the stock moves below Rs 816, shift the stop-loss to that level.

Key risks: Bata is a high beta stock and will fluctuate wildly. So this strategy is for traders who can afford to stomach that risk.

Follow-up: Last week, we had advised shorting of Educomp Solutions and ITC futures.

As expected Educomp Solutions displayed weak trend. Traders could hold the counter with a revised stop-loss of Rs 175 for the target of Rs 147.

ITC achieved the recommended target of Rs 224 during the intra-week dealings. We had also recommended writing of 180 call on Educomp Solutions and 240 call on ITC. Both the positions are currently in-the-money. Traders can consider holding it for one more week for maximum profits.

Technicals- Karur Vysya Bank, Anant raj, hcl, NMDC, NTPC, Bata, :: Business Line

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Please discuss the medium- and long-term outlook of Karur Vysya Bank. Can I enter the stock at this level?

J. Senthan

Karur Vysya Bank (Rs 372.9): Karur Vysya Bank has weathered the market correction in 2011 quite well. It has retraced about 38.2 per cent of the rally from March 2009 low and is currently attempting to hold above this level. The structural trend in this stock continues to be up.

Investors can buy the stock on declines with stop at Rs 350. Those already in possession of the stock can continue to hold with stop at Rs 350. Medium-term view will turn negative only on a weekly close below this level. Subsequent supports are at Rs 306 and Rs 260.

Resistances for the months ahead will be at Rs 440 and Rs 500. Those with shorter investment horizon can exit the stock at either of these levels. Inability to move above Rs 500 will keep the stock in the zone between Rs 350 and Rs 500 for a few months.

Such a move will, however, mean that the long-term view stays positive. Long-term targets on break above the Rs 500 ceiling are Rs 565 and Rs 719.

BATA INDIA: Buy -TP Rs805 :: PINC

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We visited a few large ‘Bata India’ stores in Mumbai recently and met the store managers. We observed that
these stores are doing really well with respect to sales and footfalls. Post our visit, we continue to believe that
Bata is an attractive long term buy at CMP of Rs688. At CMP the stock trades at 1-year forward P/E of 23.9x.

52 week Blockbuster - Bata India:: Business Line,

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The stock of shoemaker Bata India is on an indefatigable journey upwards, driven by good earnings, low debt, a real estate component and a market fondness for consumer-themed stocks. Bata has been in a restructuring phase over the past few years. It shut down unviable stores, aggressively expanded store network, opened large-format stores and revamped older stores.

In 2010, it opened 108 large-format stores, with total store count now standing at 1,200. It is this vast reach that gives Bata India an edge. A good part of the store network also lies in smaller towns and cities, where bulk of purchasing power in the lower-value segment lies. Bata has a strong standing in the value-for-money segment.

Even so, it is trying to break out of the value mould into the higher-margin premium footwear segment, focussing on its Hush Puppies outlet network and introducing brands such as Weinbrenner. The success of such a consumer perception shift remains to be seen.

Bata also earned Rs 109 crore in the March quarter by exiting its real estate joint venture for the development of its surplus land. It also managed to improve operating margins in FY-10 (January-December) to 14 per cent from 12 per cent the year before on lower raw material costs. Net margins consequently improved to eight per cent from the earlier 6.2 per cent

Sizzling stocks: Punj Lloyd , Bata India:: Business Line

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Sizzling stocks: Punj Lloyd (Rs 76.7)

Punj Lloyd kept investors riveted by sailing forth right from the outset of the week. This stock received a booster in the form of an order win from GSPC on Monday and it went on to build on these gains to close the week more than 15 per cent higher. The stock faces strong short-term resistance around Rs 78. Inability to move past this level will result in decline to Rs 62 or Rs 53 in the weeks ahead.

On the other hand, close above Rs 78 will mean that the stock can then go on to Rs 88 or Rs 108 or even Rs 147. The long as well as the medium-term trends in the stock are however down. A strong close above Rs 147 is the first requisite to signal that the structural trend in the stock is reversing higher.

Bata India (Rs 610.7)

This shoe-maker refused to stay grounded and zoomed higher to the intra-week peak of Rs 619. Bata India has been on fire right from the beginning of this year, having delivered 85 per cent YTD return. The stock is currently at life-time high. A 1:1 extrapolation of the move that began in February 2009 gives us the immediate target of Rs 640. Therefore, investors need to be wary in the entire range between Rs 600 and Rs 650.

Short-term supports are at Rs 575 and Rs 545. The medium-term view will be under threat only if the stock goes on to close below Rs 500.

Bata India: Book Profits:: Business Line

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Bata may find it difficult to match earnings growth to valuations.

The stock of Bata India has shot up 41 per cent from January '11 to date, completely bucking broader market trends. The company benefitted from its presence in the evergreen consumption sector, its erstwhile real estate division, and negligible debt.

However, at Rs 528 the stock is at 33 times trailing 12-month earnings (adjusting for one-time income of Rs 109 crore), close to its five-year average PE of 31.7 times.

Bata is making a move to shift from its low-cost value positioning to a mid-market and premium brand. The success of this move may take quite a while to come forth, and the company may face stiff competition from domestic and international brands. Revenues from real estate, which have propped earnings, are set to dry up with the company exiting its real estate joint venture.

These factors pose risks to Bata's ability to match earnings growth to high valuations. Investors may, therefore, book profits in their holdings in the stock and make the most of the scorching run it has had.

Bata India manufactures and retails footwear, with brands such as Marie Claire, Dr. Scholls and Bubblegummers, straddling multiple consumer segments. Relatively newer brands in Bata's fold are premium Hush Puppies and outdoor gear Weinbrenner.

Bata retails through a network of over 1m200 stores across the country. It has ambitious expansion plans in place, aiming to open about 100 large-format stores a year for the next three years. Bankrolling expansion is unlikely to pose a hurdle, given the company's low debt-equity of 0.1 times and its strong cash position (Rs 135 crore cash in hand at end-FY10) .

CHANGING PERCEPTION

Bata commands a strong standing as a low-cost, functional brand at the entry level and as a school-wear brand. However, it is trying to shed this image in favour of a trendier, premium standing, targeted at the vast youth market that is more open to spending more for better quality.

Changing consumer perception, however, is a challenging task and could take a long time. It requires investments in promotion and advertising. The footwear market is crowded with domestic and international brands such as Metro, Woodlands, Puma, Clarks and Reebok; most of which already have a firm footing in the youth market. With international brands looking to Indian markets to augment their revenues, competition in the branded footwear market is likely to further heat up.

Much of the Indian footwear market is fragmented and dominated by the unorganised sector.

In the March '11 quarter, the company received Rs 109.35 crore in consideration for disposing its stake in its real estate joint venture. This one-time income resulted in a six-fold jump in net profits. The company still stands to receive constructed space at no cost, but revenue from real estate ventures is not likely to flow in.

Bata is a turnaround story, utilising its securities premium account to completely write off accumulated losses in 2007. In FY-07 (Jan – Dec '07) the company posted a revenue growth of 12 per cent, a significant jump from the flat revenues in the years before that.

Since then, however, revenue growth has hovered at that level, even as the company shut more unviable stores and revamped others. Revenues have clocked a three-year compounded annual sales growth of 13 per cent to Rs 1,258 crore in FY-10. Net profits have grown 26 per cent to Rs 95 crore in the same period. Operating and net margins during this period have hovered at around 12 and 7 per cent, respectively.

Margins are unlikely to show significant expansion as the streamlining of operations as part of the turnaround strategy — which had earlier boosted margins — is more or less complete. Costs such as promotion and advertising may also rise as the company pushes its brands. Premium product lines such as Hush Puppies do bring in higher margins, but these are nascent segments. Significant margin increases in the near term on account of these lines are not likely