Bata India Upgraded to 'Hold' Rating by MarketsMOJO, Strong Debt Servicing and Fair Valuation Key Factors

Bata India, a leading consumer durables company in the midcap segment, has recently been upgraded to a 'Hold' rating by MarketsMOJO. This upgrade is based on several factors that indicate a neutral and informative outlook for the company.
One of the key reasons for the 'Hold' rating is Bata India's strong ability to service its debt. With a low Debt to EBITDA ratio of 0.55 times, the company is in a good position to manage its debt obligations. Additionally, the stock is currently in a Mildly Bullish range, with a technical trend that has improved since 21-Aug-24 and has generated 1.79% returns since then. The KST (Know Sure Thing) indicator, a key technical factor, has also been Bullish since 21 Aug 2024.

In terms of valuation, Bata India has a Fair valuation with a 7.9 Enterprise value to Capital Employed and is currently trading at a discount compared to its average historical valuations. However, the stock has generated a negative return of -14.74% in the past year, despite a 15.9% increase in profits. The PEG ratio of the company is also on the higher side at 3.3.

It is worth noting that Bata India has a high institutional holding of 35.14%, indicating that these investors have better capability and resources to analyze the fundamentals of the company compared to retail investors.

However, the company has shown poor long-term growth, with an annual rate of -3.71% in operating profit over the last 5 years. In the recent quarter, the results were also flat, with a fall of -18.8% in PBT LESS OI(Q) at Rs 66.93 crore. The non-operating income (Q) is also a significant portion of the profit before tax at 69.17%.

Overall, while Bata India has underperformed the BSE 500 index in the last 3 years, 1 year, and 3 months, the recent upgrade to a 'Hold' rating suggests a neutral and informative outlook for the company. Investors should carefully consider all the factors before making any investment decisions.