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Dalmia Securities
Safari Ind (Buy)
CMP: ₹629.35
Target: ₹902
Safari Industries is the third largest player in organised Indian luggage industry. After the company was taken over by its current Chairman & MD Sudhir Jatia in 2012, company has realigned its strategy by discontinuing non-performing SKUs and by launching new products.
Safari has become the third largest player with about 10 per cent market share and its revenue grew by 5.8x in the last six years over FY12-17. Going ahead, we expect Safari to report a top-line CAGR of about 23.0 per cent over FY2017-20E on the back of growth in its recently introduced new products and improving distribution network. Further, GST implementation will also boost the volume of branded sales.
On the bottom-line front, we expect the company to report about 56.1 per cent CAGR over FY2017-20E. The company currently trades at a P/E of 47.6x FY2019E and 35.2x its FY2020E EPS.
We change our ‘Hold’ recommendation to ‘Buy’ with target price of ₹902 (50x FY2020E EPS) from ₹666, indicating an upside of about 42 per cent from the current levels.
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