Fundamental Analysis of Safari Industries: When going on vacations, whether it’s a short weekend getaway or an extended vacation, backpacks and luggage are the important companions that accompany us.
With the travel industry picking its pace after its decline during covid, one company in the luggage Industries has given magnificent returns on its shares.
The stock we are talking about is Safari Industries, a stock held by the ace investor Ashish Kacholia. Since its lows during covid, the stock has given a multi-bagger of 785% to its investors.
In this article, we will conduct a fundamental analysis of safari industries and see if the stock has future potential to increase in the future.
Fundamental Analysis Of Safari Industries
In this article about Fundamental Analysis Of Safari Industries, we shall look at industry overview, company overview and financials reports and much more
The luggage industry in India is growing rapidly and has a bright future. The total market size for luggage is around INR 50,000 crore, with branded luggage accounting for 25% of the market. Retail sales have increased significantly due to travel and weddings.
The industry is experiencing a transition from an unorganized to an organized sector. This shift is driven by factors such as rising disposable income, increased e-commerce presence in smaller towns and rural areas, and greater awareness of brands.
Changes in consumer travel habits, such as solo trips, multiple trips in a year, weekend getaways, and international travel, have resulted in people replacing their luggage more frequently.
In this industry, the three leading companies—VIP, Samsonite, and Safari—control approximately 70% of the organized market. From FY22-FY23, the industry is expected to grow at a CAGR of 15%.
Safari Industries (India) Ltd was incorporated by Mehta and the family in 1980. The company is engaged in the business of manufacturing and trading luggage and luggage accessories under the Safari brand.
The company manufactures its hard luggage using PolyPropylene (PP) and Polycarbonate (PC) at its manufacturing plant located in Halol, Gujarat. The soft luggage is basically imported by the company and is made from a variety of fabrics.
In recent years, the company has successfully set up its own manufacturing facility, resulting in reduced dependence on external manufacturers. This strategic move has played a significant role in driving revenue growth and expanding profit margins.
During FY22-23, the company is expected to grow at a CAGR of 19% which is greater than the industry average.
Safari Industries – Financials
We will now perform a Fundamental Analysis of Safari Industries Limited using the company’s annual reports.
Revenue and Net Profit Growth
The profit and loss account of the company shows that its revenues had decreased significantly in FY21 which was a time of covid. But it managed to pick up its pack immediately in the next financial year.
For FY23, the company has recorded a total revenue of Rs 1221.44 Crores. This gives the company a CAGR growth of 20.52% in its revenue between FY19-FY23.
The table below shows the total revenues of Safari Industries for 5 financial years:
|Financial Year||Revenue (Rs, in Crores)|
The profits of the company have also followed a similar trend reporting a net loss of Rs. 20.89 crores in FY21. But on an overall basis, the company’s profit has increased from Rs 27.20 crores in FY19 to Rs.125.08 crores in FY23. This gives the company a CAGR growth of 46.44%.
The table below shows the net profit of Safari Industries for 5 financial years:
|Financial Year||Net Profit (in Crores)|
The profits of the company have increased exponentially during our period of analysis. Let us now study how the company has now performed on the margins front.
Both the operating profit margin and the net profit margin of the company maintain a constant pace with an exception to FY21. But during FY23, both the operating profit and net profit margins have doubled to 14.27% and 10.32%.
This is due to the huge increase in the company’s revenue which has led to a decrease in operating expenses.
The table below shows the operating profit margins and net profit margins of Safari Industries for 5 financial years:
|Financial Year||Operating Profit Margin||Net Profit Margin|
Return Ratios: RoCE and RoE
The company’s return ratios also indicate a positive outlook on the performance of the company.
For FY23, both the RoE and RoCE have increased exceptionally during FY23 after a steady drop in the previous financial years.
A High RoE indicates that the company has generated high returns on the capital invested by its shareholders. A high Rpce is an indication of the company effectively utilizing its overall resources
The table below shows the ROE and ROCE of Safari industries for 5 financial years:
|Financial Year||ROE (%)||ROCE (%)|
The debt-to-equity ratio of the company indicates that the company has consistently decreased its borrowings year-on-year even during the time of covid. Despite the still increase in the ratio in FY23, the amount of debt is still negligible compared to the company’s equity.
This means that the firm may keep more of its revenue because it does not have a large commitment to repay debt and interest.
The table below shows the Debt-to-equity ratio of Safari Industries for 5 financial years:
Future Plans Of Safari Industries
So far we looked at the previous fiscals’ data for our fundamental analysis of Safari Industries. This section will attempt to make sense of what lies ahead for the company and its shareholders.
- The company currently operates in 80 stores and it is planning to operate in almost 140 stores by the end of next year.
- The company aims to increase its revenue by 33% from FY22 to FY25.
- The company intends to open four retail sites every month in order to enhance profits through efficient operations.
- The company has plans of expanding its products n the premium which give a boost to its margins over the next two to three years.
Key Metrics Of Safari Industries
We are almost at the end of our fundamental analysis of Safari Industries. Let’s take a quick look at the stock’s important metrics.
|CMP||₹ 3,047.4||Market Cap (Cr.)||₹ 7,192.07|
|EPS||₹ 52.8||Stock P/E||57.3|
|Promoters Holding||47.2 %||Book Value||₹ 180|
|Debt to Equity||0.14||Price to Book Value||16.7|
|Net Profit Margin(%)||10.32||Operating Profit Margin(%)||14.27|
Ashish Kacholias’ Holdings in Safari Industries
During the March quarter of 2020, Ashish Kacholia made an initial investment in Safari Industries, purchasing 3,83,415 shares of the company. This initial investment represented 1.71% of the total shares of the company.
Over the subsequent quarters, Ashish Kacholia has made many adjustments to his holdings. As of the June quarter, his portfolio consists of 543,000 shares, which now account for 2.29% of the total shares of Safari Industries.
As we conclude our fundamental analysis of Safari Industries Limited, we can draw the conclusion that the rise in the stock prices is backed by the exponential increase in its revenue and profit in FY23.
Based on the company’s plans, there is still room for the stock price to rise further, as long as the profits continue to grow in the future.
Written By – Aaron Vas
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