Prabhudas Lilladher's research report on Safari Industries India
We cut our EPS estimates by 7%/5% for FY26E/FY27E as we fine tune our topline growth assumptions in light of rising competitive intensity. Safari reported an in-line performance with EBITDA margin of 11.4% (PLe 11.3%) as pricing environment has become increasingly competitive (volume growth of 22% resulted in value growth of 14% indicating price erosion). We believe pricing pressure would prevail in the near term given one leading player is undergoing inventory liquidation and e-com channel is becoming increasingly relevant to gain market share. Nonetheless, Safari’s new plant at Jaipur has begun operations and progress on utilization front will be keenly eyed as it can act as growth & margin kicker. Backed by the expansion, we expect sales/PAT CAGR of 22%/46% over FY25E-FY27E.
Outlook
Maintain ‘BUY’ with a TP of Rs2,783 (45x FY27E EPS; no change in target multiple). Near term margin volatility given the ongoing price war is a key risk to our call.
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