The stock of one of the leading Indian company focused on manufacturing and marketing luggage and luggage accessories received a buy call from the foreign brokerage with an upside of 31%.
Share movement
Safari Industries Ltd is a small-cap company valued at Rs 10,376 crores. As of Tuesday, its shares were trading at Rs 2,128 each, marking a 1.11 percent decrease from the previous day on the National Stock Exchange.
Over the past six months, Safari Industries Ltd’s shares have risen by 14%, and over the past year, they have increased by 43%.
About the company
Safari Industries specializes in manufacturing and trading luggage and accessories, categorized into hard luggage made of PolyPropylene (PP) and Polycarbonate (PC), produced at its facility in Halol, Gujarat. Revenue is primarily derived from hard luggage (54%) and soft luggage (46%).
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Renowned investor Ashish Kacholia holds 9,00,000 shares, equivalent to 1.85% of the company as of the June quarter in 2024.
From FY22-23 to FY23-24, Safari Industries saw a notable 28% increase in revenue, rising from ₹1,212 crores to ₹1,550 crores. During the same period, net profit also grew significantly by 41%, climbing from ₹125 crores to ₹176 crores.
Target
Investec, an international financial services company, has set a target price of Rs 2,800 per share for Safari, citing a strong future outlook on the stock with a potential upside of 31%. The company estimates that the current luggage industry, valued at Rs 10,000 crore, is likely to grow by more than 50% to Rs 15,000 crore, according to Investec’s analysis.
Reason for the target
Investec expects key growth drivers for safari includes such as increased air and rail passenger traffic, a rise in the working female population, a shift from the unorganized to organised sectors (specifically in backpacks), and a reduction in replacement cycles.
E-commerce remains a key growth driver, with changes in marketing strategies being particularly encouraging.However, traditional retail stores still account for the bulk of sales, and general trade is under- penetrated. Major brands like VIP and Safari are present in only 45% and 35% of retail counters, respectively.
Investec expects D2C players to gradually make inroads into traditional retailing, to enhance visibility and create brand pull, through loyalty and after-sales services. The emergence of new brands offers promise, with increasing competition and evolving strategies seen as positive developments, brokerage mentioned.
Safari has significantly increased its market share over the last ten years by distributing its products widely and concentrating on selling quickly at the correct price. The brokerage firm highlighted the importance of increasing brand visibility to increase revenue.
Safari’s marketing strategy, which focuses on promoting the product itself rather than relying on a brand ambassador, and its emphasis on social media, online marketplaces, and online TV, has been successful. According to the brokerage, every Rs 1 spent on advertising yields Rs 6.6 in sales.
Investec also noted significant changes in distribution channels impacting the luggage industry. Over the past decade, Indian consumers have increasingly favored e-commerce, leading to the emergence of several direct-to-consumer companies.
Written by Omkar Chitnis
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