Robust growth in revenue: For Q1FY2019, Safari Industries (Safari) posted a yoy growth of 49% growth in revenue mainly led by volume growth and low base effect (Q1FY2018 revenue was subdued due to GST impact). The company has reported net revenue of `156 cr which was the highest ever revenue achieved. The company is garnering market share from the unorganized market and seeing good demand in its backpacks and new categories which is driving such strong growth in its financials.
Outlook and Valuation: We remained convinced about its long term growth story as the company is in sweet spot in a fast growing luggage industry. We have upgraded our estimates by 30-33%, in view of its improving growth and margin outlook. We are now expecting a CAGR of ~30%/60% in revenue/ earnings over FY18-20E. The stock has given 67% return since our initiation in April and is currently trading at 35x our revised FY2020 earnings, which is still attractive looking at its robust growth trajectory. Hence, we recommend BUY with a target price of `1000 (40x FY2020E EPS).
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