Up to 125% return in 17 months! These two stocks from same sector can add comfort to your portfolio
Measures such as entry into departmental stores, increasing franchisee stores and focus on the wholesale channel have started to show results.
Looking for a smooth movement for your investment portfolio amid the ongoing rally on Dalal Street? Footwear majors Bata India and Relaxo Footwear, which have rallied up to 125% since March 2020 lows, looks attractive to market watchers post Q1 results amid rising disposable income.
Shares of Bata India have jumped 55% to Rs 1675 on August 12 from Rs 1,079 on March 24 last year. On the other hand, Relaxo Footwears have advanced 125.73% to 1,162 during the same period.
Latest report card
Leading shoemaker Bata India on August 11 reported narrowing of consolidated net loss to Rs 69.47 crore for the first quarter ended June 30, 2021. It had posted a loss of Rs 100.88 crore for the same period of 2020-21. Revenue from operations almost doubled to Rs 267.04 crore during the period under review from Rs 135.07 crore in the corresponding quarter last fiscal year.
“Sales across retail outlets remained largely subdued, owing to the second wave of Covid-19 infections and ensuing lockdowns. However, sales through e-commerce platforms continued to remain robust and witnessed an uptick despite the restrictions,” Bata India said.
On the other hand, Relaxo Footwears last month posted a 27.83% growth in net profit to Rs 30.96 crore in the quarter ended in June 2021. It had posted a net profit of Rs 24.22 crore in the April-June quarter of the last fiscal. Revenue from operations rose by 36.73% to Rs 497.13 crore during the period under review compared to Rs 363.58 crore in the corresponding period of the previous fiscal. Relaxo Footwears’ total expenses were at Rs 462.15 crore, up 36.67% compared to April-June 2020.
Which stock to buy?
ICICI Securities is positive on Bata India with a target price of Rs 1,925, indicating an upside of nearly 15% from the current market price. In an earlier report, ICICI Securities said that Bata continues to have a healthy balance sheet with surplus cash of Rs 1,093 crore as of FY21. Strong brand bouquet, pan-India retail reach and sound financial position would act as enablers for Bata to benefit from liquidity stress faced by smaller unorganised footwear manufacturers thereby enhancing opportunity for market share gain.
Phillip Capital also has a ‘Buy’ call on Bata with a target price of Rs 1,930. The brokerage recently upgraded the stock to ‘Buy’ based on volume growth, driven by the vaccination drive, pent up demand, and schools reopening.
“Our analysis of FY21’s annual report gives us confidence. Measures such as entry into department stores, increasing franchisee stores, focus on the wholesale channel and investments in the omnichannel have started to show results. Investments in product innovation, market initiatives, a new brand ambassador, and its loyalty program would drive sales in the medium term. Increasing contribution from third-party brands, K-store, and stable royalty rate offers comfort,” Phillip Capital said in a report.
On the other hand, Elara Capital has an ‘Accumulate’ call on Relaxo with a target price of Rs 1,229. “We believe Relaxo Footwears is a better play in the listed footwear industry on account of the long structural road, given the company’s strong manufacturing capability and a huge consumer base,” Elara Capital said.
ICICI Securities also has a ‘Buy’ call on Relaxo with a target price of Rs 1,330. Relaxo is India’s leading footwear manufacturing company, boasting of the largest capacity of 7.5 lakh pairs per day. The company is a dominant player in the open footwear space (around 80% of sales), with its strong portfolio of brands (‘Flite’, ‘Bahamas’, ‘Sparx’, ‘Relaxo).
“Relaxo has been an exceptional performer with the stock price appreciating at around 37% CAGR in the last five years. We continue to remain structurally positive and maintain ‘Buy’ rating,” ICICI Securities said.