Prabhudas Lilladher's research report on Safari Industries (India)
We initiate coverage on Safari Industries (Safari) with a BUY rating given 1) it is one of India’s fastest growing luggage brand having 23% market share as of FY21 2) planned hard luggage (HL) capacity expansion of Rs500mn at Halol will reduce reliance on outsourcing, and structurally elevate GM profile and 3) full benefit of distribution network expansion (up from >5,950 in July-18 to >9,300 in Aug-21) and SKU extension (up from 100+ in July-18 to 800+ in Aug-21) is yet to play out, as sales volumes were impacted by COVID in last 18-24 months. Additionally, mass positioning places Safari in an advantageous situation to ride on revenge travel theme post-COVID, as it stands to benefit from up-trading (unorganized to organized shift) as well as down-trading (temporary shift from economy to mass brands due to decline in propensity to spend).
Given strong growth prospects, improvement in RoE/RoCE to 21.1%/22.9% by FY24E, strengthening cash conversion cycle and healthy BS (0.1x D/E in FY24E) we value the stock at 35x FY24E EPS and arrive at a TP of Rs1,264 per share. Initiate BUY. Near term pressure on GM due to RM cost inflation is a key risk to our call.
At 15:24 hrs Safari Industries (India) was quoting at Rs 827.85, up Rs 2.60, or 0.32 percent.
It has touched an intraday high of Rs 842.00 and an intraday low of Rs 815.00.
It was trading with volumes of 752 shares, compared to its thirty day average of 2,210 shares, a decrease of -65.98 percent.
In the previous trading session, the share closed down 0.09 percent or Rs 0.75 at Rs 825.25.
The share touched its 52-week high Rs 1,049.15 and 52-week low Rs 535.10 on 08 February, 2022 and 19 April, 2021, respectively.
Currently, it is trading 21.09 percent below its 52-week high and 54.71 percent above its 52-week low.
Market capitalisation stands at Rs 1,853.51 crore.
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