Safari Industries Q4FY23 result was significantly better than our expectations. Revenues jumped 57 per cent year on year (VIP had reported 27 per cent y-o-y growth) to ₹302.1 crore on account of strong improvement in tourism activities. Gross margin increased by 447 basis points (bps) y-o-y and 144 bps quarter on quarter (q-o-q) to 43.1 per cent due to price hike amidst stable input cost. EBITDA jumped 213 per cent y-o-y (VIP reported 97 per cent y-o-y growth) to ₹51.6 crore; EBITDA margin stood at 17.1 per cent.
Safari has ventured into premium range under the brand name Urban Jungle, which is comparable to premium luggage categories of VIP Industries and Samsonite. It has received strong initial response (given strong industry tailwinds). . This could provide additional boost to its margins over the coming two-three years. We raise our margin estimates for FY24-25 given the strong result beat in Q4-FY24. Our FY24/FY25 EBITDA stands revised upwards 11 per cent each. We now value the stock at a PER of 40x FY25E (earlier 35x FY25) EPS to derive a target price of ₹3,223 (earlier ₹2,499).
We continue to applaud the management’s ability to outperform industry sales growth and also expand operating margins to higher levels.