Image Credit : Justdial
During the massive COVID-19 pandemic, Bata India Ltd is stepping forward in its performance. The March ended quarter (Q4) exhibits that the company has been able to control costs successfully even after its sales growth stepped down. On Thursday this has impressed the Street with the stock increasing over 5 per cent.
The company’s Q4 revenues were marginally behind the Street’s estimates, dropping around 5 per cent year-on-year. Due to second wave of COVID-19 the sales were also relatively low. The Q3 sales were encouraged by the festive season sales. However, the company’s Q4 sales were not too disappointing.
Bata more than made up for the slack in sales through its sharp cost controls. Savings in rentals and discretionary spending helped to cut down other expenses by 18 per cent y-o-y. It is an anticipated that this factors will play a huge role when recovery takes places in the coming quarters.
Analysts at Axis Capital in a client note noted, “While both revenue/EBITDA was 6 per cent/ 15 per cent below our estimate, we wouldn’t read too much into the per cent miss given high volatility in underlying retail demand in current environment and consequent operational impact given high fixed cost nature of Bata’s business.”
The company carried forward to stretch its branch network and brand building by appointing new distributors. Irrespective of the lockdown, the last quarter’s addition of 10 new franchise in smaller town is seen to be a good step forward. Along with these, the firm aspires to scale up its online presence through its own channels and other online marketplaces. As per reports, a new CEO has been appointed in the fast moving consumer goods space.
In the recent past, the stock has performed well. However, it is yet about 13 per cent away from previous years pre-COVID-19 highs. It is predicted that the second wave of the pandemic might impact revenues in FY21, but driven by some of its premium products and new launches the Street is expecting a good recovery in FY23. At present, the investors are paying a high price. The stock trades at 65 times FY20 earnings, which displays the steady state performance before the pandemic.