Safari Industries volume growth and Jaipur capacity support market-share expansion

Investment View and Valuation

Motilal Oswal Financial Services Limited (MOFSL) reiterates its Buy rating on Safari Industries with a target price of Rs 2,250, derived through a discounted cash flow (DCF) valuation and implying a 45x FY28 P/E multiple. The target represents 50 per cent upside from the report's CMP of Rs 1,505.

MOFSL views 1QFY27 revenue as broadly in line, supported by higher volumes, while raw-material inflation compressed margins. The broker retained its FY27E and FY28E estimates unchanged.

1QFY27 Financial Performance

Safari Industries reported 1QFY27 revenue growth of 11.5 per cent year on year to Rs 588.6 crore, supported by around 10 per cent volume growth. Revenue was 2 per cent below MOFSL's estimate of Rs 599.1 crore.

April and May demand was weak because of subdued wedding-related demand. There were 24 wedding days in 1QFY27 compared with 29 in 1QFY26, mainly due to Adhik Maas. Growth recovered strongly during June. The offline channel recorded low-single-digit growth, while e-commerce, which accounts for around 45 per cent of sales, grew in the mid-teens.

EBITDA was 5 per cent above MOFSL's estimate despite the year-on-year decline. EBIT declined 8.8 per cent, reflecting 9.2 per cent higher depreciation. PAT declined 5.4 per cent year on year despite 24.1 per cent higher other income, as interest costs rose 15.0 per cent. PAT was 10 per cent above the broker's estimate.

Raw-Material Inflation and Pricing

Polypropylene and polycarbonate prices increased by 10-15 per cent amid the West Asia crisis. MOFSL's channel checks indicate that Safari Industries took an approximately 6 per cent price increase.

The broker's online luggage price tracker found that Safari, Mokobara and HRX raised prices by 10-20 per cent over the preceding month. These increases were sustained into the current month, which MOFSL views positively for the sector.

Gross margin declined about 120 basis points year on year and 480 basis points sequentially to 44.6 per cent in 1QFY27. EBITDA margin declined 220 basis points year on year to 12.8 per cent.

Growth Strategy and Capacity Expansion

MOFSL expects Safari Industries to outpace industry growth with a 16 per cent revenue CAGR, aided by the addition of 0.15 million pieces per month of capacity at the Jaipur plant. The broker expects EBITDA margins to settle at around 13.5-14.0 per cent over the next two years.

The company's market-share thesis rests on developing the Urban Jungle brand and SI-Select premium positioning, launching new SKUs and adding four to five exclusive brand outlets each month.

Management expects the premium portfolio, currently 5 per cent of sales, to deliver more than 25 per cent CAGR over FY26-FY28.

Safari Industries' board appointed Aditya Bhargava, who has 22 years of experience, as CFO effective August 4, 2026.

MOFSL Estimates

Key Risks

• Higher competitive intensity from VIP, Samsonite and direct-to-consumer players.
• A sudden rise in competition and aggressive discounting by regional competitors.