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Dalmia Securities
Safari Industries (Buy)
CMP: ₹722.55
Target: ₹947
Safari Industries is the third largest player in organised Indian luggage industry. After the company was taken over by current Chairman & MD Sudhir Jatia in 2012, company has realigned its strategy by discontinuing non-performing SKUs & by launching new products. The company’s products are available in major 25+ cities across 3,500+ outlets.
Q3 FY19 sale was in-line with our estimate; Margin remain subdued on y-o-y basis due to overall operating cost.
Safari’s revenue increased by 39.4 per cent y-o-y to ₹144.16 crore in Q3FY19 on the back of overall good demand in the market and better product mix.
The company’s gross profit margin contracted significantly by 772 basis points to 40.05 per cent in Q3FY19 on y-o-y basis due to rise in raw material cost, higher import duty and rupee depreciation. Government has hiked import duty on luggage industry to 15 per cent from 10 per cent effective from September 27, 2018.
Safari’s EBITDA declined by 13.91 per cent y-o-y to ₹10.98 crore in Q3FY19. Safari’s EBITDA margin stood at 7.62 per cent in Q3FY19 against 12.33 per cent in Q3FY18. The company’s PAT decreased by 26.79 per cent y-o-y to ₹4.96 crore in Q3FY19. Its PAT margin also contracted by 311 basis points to 3.44 per cent in Q3FY19 on y-o-y basis.
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