Result update| Luggage
November 9, 2018
Safari Industries
BUY
CMP
`749
Target Price
`1000
Strong growth in revenue: For Q2FY2019, Safari Industries (Safari) posted a
Investment Period
12 Months
strong yoy growth of 44% in revenue to `127 cr mainly led by volume growth.
The company is garnering market share from the unorganized market and seeing
Stock Info
good demand in its backpacks and new categories which is driving such strong
Sector
Luggage
growth in its top line.
Market Cap (` cr)
1,667
Margins were little subdued: In spite of strong growth in revenue, OPM were
Net Debt (` cr)
41
Beta
0.7
stable at 9% on yearly basis which has come down from the peak level of 12.9%
52 Week High / Low
1005/405
reported in Q1FY2019. First quarter is also the strongest quarter of the year in
Avg. Daily Volume
9,051
terms of revenue, hence Q1 margins are usually better than the Q2 margins.
Face Value (`)
2
Margin pressure was seen mainly due to rise in input cost. This was driven by
BSE Sensex
35,237
rupee depreciation as most of the luggage is imported from China. The company
Nifty
10,597
is expecting some margin pressure to continue in coming few quarters if the
Reuters Code
SAFA.BO
rupee depreciation continues.
Bloomberg Code
SII.IN
PAT rose by 72% yoy: With a moderate rise in interest and depreciation, PAT grew
to `6 cr, a growth of 72% yoy.
Shareholding Pattern (%)
Outlook and Valuation: We remained convinced about its long term growth story
Promoters
57.8
as the company is in sweet spot in a fast growing luggage industry. We have
MF / Banks / Indian Fls
14.7
maintained our estimates and are expecting a CAGR of ~30%/60% in revenue/
FII / NRIs / OCBs
9.9
earnings over FY18-20E. The stock has given 44% return since our initiation in
Indian Public / Others
17.7
April and is attractively trading at 30.5x our FY2020 earnings, post recent
correction. We feel that the current valuations are attractive looking at its robust
Price chart
growth trajectory and it offers a good entry point to the long term investors.
Hence, we recommend BUY with a target price of `1000 (40x FY2020E EPS).
Key Financials
Y/E March (` cr)
FY2016
FY2017E
FY2018E
FY2019E
FY2020E
Net Sales
278
359
415
540
702
% chg
28.8
29.0
15.8
30.0
30.0
Net Profit
7.8
10.4
21.2
40.8
54.6
% chg
55.9
33.8
103.9
92.3
33.8
OPM (%)
6.7
6.3
9.8
12.9
12.9
Source: capital line
EPS (Rs)
3.5
4.7
9.5
18.3
24.5
P/E (x)
214.2
160.1
78.5
40.8
30.5
P/BV (x)
18.3
16.7
9.6
7.9
6.4
Nidhi Agrawal
RoE (%)
8.5
10.4
12.3
19.4
21.0
022-39357800 Ext: 6872
[email protected]
RoCE (%)
9.7
12.1
15.2
23.6
26.0
EV/Sales (x)
6.2
4.8
4.1
3.1
2.4
EV/EBITDA (x)
92.9
75.9
42.0
24.2
18.8
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
Safari Industries |Result Update
Exhibit 1: Quarterly results at a glance
Rs cr
Q2FY18
Q1FY19
Q2FY19
YoY %
QoQ %
H1FY19
H1FY18
YoY %
Net Sales
88
156
127
44%
-18%
283
193
47%
Total expenditure
80
134
116
45%
-14%
250
178
41%
Raw Material Consumed
6
17
26
314%
50%
43
14
202%
Stock Adjustment
-1
0
-22
--
--
-23
6
-452%
Purchase of Finished Goods
39
70
69
77%
-2%
139
87
59%
Employee Expenses
13
16
16
25%
1%
32
25
28%
Other Expenses
24
32
28
18%
-12%
59
45
31%
As a % of sales
COGS
50%
56%
57%
56%
56%
Gross margin
50%
44%
43%
44%
44%
Employee Expenses
14%
10%
12%
11%
13%
Other Expenses
27%
20%
22%
21%
24%
Total expenditure
91%
86%
91%
88%
92%
Operating profit
8
22
11
42%
-47%
33
15
126%
Other Income
0
0
0
2%
-48%
0
0
29%
PBIDT
8
22
12
42%
-47%
34
15
123%
Interest
1
1
1
8%
-22%
2
1
43%
PBDT
7
21
11
45%
-48%
32
14
131%
Depreciation
1
2
2
59%
11%
4
3
49%
PBT
6
19
9
42%
-54%
28
11
150%
Tax
3
7
3
16%
-57%
10
4
123%
Adjusted Profit
4
12
6
72%
-50%
18
7
168%
Ratios
OPM %
9.1%
13.9%
9.0%
11.7%
7.6%
PAT margin %
4.0%
7.8%
4.7%
6.4%
3.5%
Tax rate %
42.6%
35.9%
38.8%
36.8%
38.5%
Source: Company
Exhibit 2: Margins off peak from Q1FY2019 level
Source: Company, Angel Research
November 9, 2018
2
Safari Industries |Result Update
Risks to our estimates
Volatility in foreign currency could impact the company’s profitability (77% of
its revenue comes from soft luggage, which is imported from China).
With closure of many luggage units in China (owing to pollution concerns),
the surviving suppliers have started taking price hikes which is could put
pressure on its margins, unless price hike is taken.
Increase in competition from unorganized players would impact overall
growth of the company
Safari’s 23% sales comes from hard luggage segment and any increase in
input cost (most of the key raw material is polypropylene and aluminum)
could negatively impact profitability
November 9, 2018
3
Safari Industries |Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Total operating income
278
359
415
540
702
% chg
28.8
29.0
15.8
30.0
30.0
Total Expenditure
260
336
375
470
611
Raw Material
173
219
226
298
387
Personnel
29
41
53
59
77
Selling and Administration Expenses
48.1
65.4
96.2
97.2
126.4
Others Expenses
9
10
-
16
21
EBITDA
19
22
41
70
91
% chg
63.1
21.3
81.6
71.2
30.0
(% of Net Sales)
6.7
6.3
9.8
12.9
12.9
Depreciation& Amortisation
4
5
6
7
7
EBIT
14
17
35
63
83
% chg
70.7
20.0
99.9
81.8
32.4
(% of Net Sales)
5.2
4.8
8.3
11.7
11.9
Interest & other Charges
3
3
3
4
4
Other Income
1
1
2
2
2
(% of PBT)
6.5
7.4
4.6
3.1
2.7
Share in profit of Associates
-
-
-
-
-
Recurring PBT
12
15
33.4
61
82
% chg
105.9
25.2
123.1
82.7
33.8
Tax
4
5
12
20
27
(% of PBT)
35.2
34.1
36.4
33.0
33.0
PAT (reported)
8
10
21
41
55
Extraordinary Items
(0)
(1)
-
-
-
ADJ. PAT
8
10
21
41
55
% chg
55.9
33.8
103.9
92.3
33.8
(% of Net Sales)
2.8
2.9
5.1
7.6
7.8
Fully Diluted EPS (Rs)
3.5
4.7
9.5
18.3
24.5
% chg
55.9
33.8
103.9
92.3
33.8
Source: Company, Angel Research
November 9, 2018
4
Safari Industries |Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
SOURCES OF FUNDS
Equity Share Capital
4
4
4
4
4
Reserves& Surplus
87
96
168
206
256
Shareholders Funds
91
100
173
210
260
Equity Share Warrants
-
-
-
-
-
Total Loans
58
44
54
57
60
Deferred Tax Liability
-
-
0
-
-
Total Liabilities
149
143
228
267
320
APPLICATION OF FUNDS
Gross Block
42
45
60
70
80
Less: Acc. Depreciation
18
22
28
35
42
Net Block
24
23
31
35
37
Capital Work-in-Progress
0
1
0
1
1
Investments/ Other NC assets
0
-
6
-
-
Current Assets
143
165
244
295
359
Inventories
76
94
123
156
199
Sundry Debtors
54
58
104
89
115
Cash
5
5
3
32
21
Loans & Advances
8
7
2
2
3
Other Assets
-
-
13
16
20
Current liabilities
27
54
53
64
77
Net Current Assets
116
110
190
232
282
Deferred Tax Asset
(0)
(0)
-
-
-
Total Assets
149
143
228
267
320
November 9, 2018
5
Safari Industries |Result Update
Consolidated Cash flow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018E FY2019E FY2020E
Profit before tax
12
15
33
61
82
Depreciation
4
5
6
7
7
Change in Working Capital
0
0
(79)
(7)
(62)
Interest / Dividend (Net)
3
3
3
4
4
Direct taxes paid
(4)
(5)
(12)
(20)
(27)
Others
(28)
4
42
1
0
Cash Flow from Operations
(13)
22
(6)
47
4
(Inc.)/ Dec. in Fixed Assets
(16)
(5)
(5)
(10)
(10)
(Inc.)/ Dec. in Investments
1
(1)
0
0
0
Cash Flow from Investing
(15)
(6)
(5)
(10)
(10)
Issue of Equity
7
0
0
0
0
Inc./(Dec.) in loans
3
1
11
3
3
Dividend Paid (Incl. Tax)
0
(16)
(2)
(3)
(5)
Interest / Dividend (Net)
(3)
(3)
(3)
(4)
(4)
Cash Flow from Financing
29
(17)
6
(5)
(6)
Inc./(Dec.) in Cash
1
(2)
(5)
32
(11)
Opening Cash balances
3
4
5
0
32
Closing Cash balances
4
2
0
32
21
November 9, 2018
6
Safari Industries |Result Update
Key Ratios
Y/E March
FY2016
FY2017
FY2018
FY2019E FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
214.2
160.1
78.5
40.8
30.5
P/CEPS
141.1
111.3
60.9
35.0
26.9
P/BV
18.3
16.7
9.6
7.9
6.4
Dividend yield (%)
0.0
0.1
0.1
0.2
0.3
EV/Sales
6.2
4.8
4.1
3.1
2.4
EV/EBITDA
92.9
75.9
42.0
24.2
18.8
EV / Total Assets
11.5
11.9
7.5
6.3
5.3
Per Share Data- `
EPS (Basic)
3.5
4.7
9.5
18.3
24.5
EPS (fully diluted)
3.5
4.7
9.5
18.3
24.5
Cash EPS
5.3
6.7
12.3
21.4
27.9
DPS
0.2
0.4
0.8
1.5
2.1
Book Value
40.9
44.9
77.7
94.5
117.0
Returns (%)
ROCE
9.7
12.1
15.2
23.6
26.0
Angel ROIC (Pre-tax)
10.0
12.5
15.8
26.7
27.8
ROE
8.5
10.4
12.3
19.4
21.0
Turnover ratios (x)
Asset Turnover (Gross Block)
6.6
7.9
7.0
7.8
8.8
Inventory / Sales (days)
100
96
108
106
104
Receivables (days)
71
59
91
60
60
Payables (days)
92
141
114
114
114
Working capital cycle (ex-cash) (days)
80
14
85
52
50
Source: Company, Angel Research
November 9, 2018
7
Safari Industries |Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
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sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
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responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
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Disclosure of Interest Statement
Safari Industries
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
November 9, 2018
8