Buy Safari Industries (India); target of Rs 2553: Prabhudas Lilladher

Prabhudas Lilladher's research report on Safari Industries (India)

We increase our FY23E/FY24E/FY25E EPS estimates by 16%/6%/1% respectively as we re-align our GM assumptions given benefits arising from indigenous manufacturing have started kicking in. Safari’s GM improved 1,170 bps YoY and 630 bps QoQ to 45.1%; while EBITDA margin of 18.1% was highest ever as operating leverage benefits flowed through from having a lean indirect cost structure. We maintain our positive stance on Safari given 1) mass/value positioning is expected to result in above average industry growth in foreseeable future and 2) GM profile is expected to witness an improvement amid expansion in HL manufacturing capacity to 525,000 units per month, stabilization in sea freight and correction in RM prices.

Outlook

We expect sales/PAT CAGR of 16%/22% over FY23E-FY25E and maintain BUY with a TP of Rs2,553 (38x Sep-24EPS; no change in target multiple). Safari trades at 31x/25x our FY24E/FY25E EPS estimates which is at a 6%/3% discount to market leader VIP and remains our preferred pick in the luggage space.