Please refer to important disclosures at the end of this report
1
Y/E March (` cr)
2QFY20
2QFY19
% yoy
1QFY20
% qoq
Net sales
170
130
31.1
203
(16.4)
EBITDA
17
11
45.6
21 (19.4)
EBITDA margin (%)
9.8
8.8
98bp
10.2
(36bp)
Adjusted PAT
8
6
29.8
9
(7.1)
Source: Company, Angel Research
For 2QFY2020, Safari Industries (SIL) posted Strong Result top-line and bottom-
growth. Revenue grew ~31% yoy to `170cr.
On the margin front, the company
reported operating margin improvement by 98bps yoy. On the bottom-
line front,
SIL reported de-growth of ~30% yoy to ~`8cr due to Strong top-
line and operating
performance.
Strong volumes boost overall top-line growth: The Company’s top-
line grew by
~31% yoy to `170cr on the back of strong volume growth (
market share gain from
unorganized player).
Strong operating performance boosted the overall profitability:
On the margin
front, the company reported operating margin improvement by 98
bps yoy. On the
bottom-line front, SIL reported de-growth of ~30% yoy to ~`8cr due to Strong top
-
line and operating performance.
Outlook and Valuation: Going ahead, we expect SIL to report a top-
line CAGR of
~26% over FY19-21E to ~`910cr on the back o
f diversified product portfolio
(catering to customers from all segments), and strong distribution network with
high
brand recall. Moreover, we believe that SIL’s bottom-line is set to grow at a
CAGR
of ~36% over FY11-21E due to gradual improvement in operating margin.
We
maintain our Buy recommendation on the stock with a Target Price of `717.
Key Financials
Y/E March (` cr)
FY2018
FY2019
FY2020E FY2021E
Net sales 415 578 753 910
% chg 15.8 39.1 30.4 20.8
Adj. Net profit 21.2 27.2 36.3 50.1
% chg 103.3 28.3 33.2 38.1
EBITDA margin (%) 9.8 9.1 9.1 10.0
EPS (`) 9.5 12.2 16.2 22.4
P/E (x) 60.0 46.8 35.1 25.4
P/BV (x) 9.5 8.2 8.4 6.8
RoE (%) 12.0 13.3 18.1 20.4
RoCE (%) 14.9 14.3 19.3 22.6
EV/Sales (x) 3.2 2.4 1.8 1.5
EV/EBITDA (x) 32.5 26.3 20.1 15.1
Source: Company, Angel Research Note
BUY
CMP `560
Target Price `717
Investment Period 12 months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters
MF / Banks / Indian Fls
FII / NRIs / OCBs
Indian Public / Others
Abs. (%) 3m 1yr 3yr
Sensex 8.5 14.1 52.5
SIL (0.3) (25.5) 171.0
Luggage
BSE Sensex 40,158
Nifty 11,841
SAFA.BOReuters Code
SII.IN
57.6
14.5
11.0
17.0
Net Debt (
`
cr)
Market Cap (
`
cr) 1,275
41
Beta 0.7
52 Week High / Low 829/481
Avg. Daily Volume 3,823
Face Value (
`
) 2
Price Chart
Source: Company, Angel Research
Research Analyst
Amarjeet S Maurya
022-40003600 Ext: 6831
amarjeet.maurya@angelbroking.com
Safari Industries
Performance Update
0
200
400
600
800
1000
1200
Nov-16
Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
2QFY2020 Result Update |
Luggage
November 14, 2019
Safari Industries|2
QFY2020 Result Update
November 14, 2019
2
2QFY20 Performance
Y/E March (` cr) 2
QFY20
2
QFY19
% yoy
1QFY
20
% qoq
1HFY20
1HFY19
% chg
Net Sales
31.1
203.06
(16.4)
373
287
30.0
Consumption of RM
95
75
2
7.7
122
(22.1)
217
163
33.5
(% of Sales)
56.1
57.6
60.2
58.3
56.8
Staff Costs
20
16
28.9
19
4.8
40
31
26.3
(% of Sales)
12.0
12.2
9.6
10.7
11.0
Other Expenses
37
28
35.2
41
(8.0)
77
59
30.8
(% of Sales)
22.1
21.4
20.1
20.8
20.7
Total Expenditure
29.7
182
(16.1)
335
254
32.0
Operating Profit
17
11
45.6
21
(19.4)
38
33
14.7
OPM
9.8
8.8
10.2
10.2
11.6
Interest
3
1
282.5
3
5.5
6
2
225.7
Depreciation
5
2
138.9
5
4.1
10 4
145.8
Other Income
0
0
(31.3)
1
(82.5)
0
0
(46.4)
PBT (excl. Ext Items)
9
9
(0.2)
14
(36.0)
22
28
(19.0)
Ext (Income)/Expense
-
-
-
PBT (incl. Ext Items)
9
9
(0.2)
14
(36.0)
22
28
(19.0)
(% of Sales)
5.1
6.7
6.7
6.0
9.7
Provision for Taxation
1
3
(73.5)
5
(86.4)
6
9
(37.9)
(% of PBT)
7.7
29.1
36.4
25.9
33.8
Reported PAT
8
6
29.8
9
(7.1)
17
18
(9.3)
PATM
4.7
4.8
4.2
4.5
6.4
Minority Interest After NP
Reported PAT
8
6
29.8
9
(7.1)
17
18
(9.3)
Source: Company, Angel Research
Safari Industries|2
QFY2020 Result Update
November 14, 2019
3
Downside risks to our estimates
Volatility in foreign currency could impact the company’s profitability ( most 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 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
Safari Industries|2
QFY2020 Result Update
November 14, 2019
4
Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018 FY2019 FY2020E FY2021E
Total operating income
278
359
415
578
753
910
% chg
28.8
29.0
15.8
39.1
30.4
20.8
Total Expenditure
260
336
375
525
685
819
Raw Material
173
219
226
334
435
525
Personnel
29
41
53
66
87
107
Selling and Administration Expenses
48.1
65.4
96.2
-
-
-
Others Expenses
9
10
-
126
163
187
EBITDA
19
22
41
52
69
91
% chg
63.1
21.3
81.6
28.7
30.7
32.7
(% of Net Sales)
6.7
6.3
9.8
9.1
9.1
10.0
Depreciation& Amortisation
4
5
6
8
10
12
EBIT
14
17
35
44
59
79
% chg
70.7
20.0
99.9
27.4
33.2
34.8
(% of Net Sales)
5.2
4.8
8.3
7.6
7.8
8.7
Interest & other Charges
3
3
3
4
12
14
Other Income
1
1
2
1
2
2
(% of PBT)
6.5
7.4
4.6
3.2
4.1
3.0
Share in profit of Associates
-
-
-
-
-
#REF!
Recurring PBT
12
15
33.4
41
48
67
% chg
105.9
25.2
123.1
22.9
18.2
38.1
Tax
4
5
12
14
12
17
(% of PBT)
35.2
34.1
36.4
33.6
25.2
25.2
PAT (reported)
8
10
21
27
36
50
Extraordinary Items
(0)
(1)
-
-
-
-
ADJ. PAT
8
10
21
27
36
50
% chg
55.9
34.2
103.3
28.3
33.2
38.1
(% of Net Sales)
2.8
2.9
5.1
4.7
4.8
5.5
Fully Diluted EPS (`)
3.5
4.7
9.5
12.2
16.2
22.4
% chg
55.9
34.2
103.3
28.3
33.2
38.1
Safari Industries|2
QFY2020 Result Update
November 14, 2019
5
Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
4
4
4
4
4
4
Reserves& Surplus
91
101
172
200
195
241
Shareholders Funds
95
105
177
204
200
246
Equity Share Warrants
-
-
-
-
-
-
Total Loans
58
42
55
104
104
104
Deferred Tax Liability
1
1
1
0
-
-
Total Liabilities
150
143
228
304
338
384
APPLICATION OF FUNDS
Gross Block
42
28
39
44
54
64
Less: Acc. Depreciation
18
4
7
15
25
36
Net Block
24
23
31
29
29
27
Capital Work-in-Progress
0
1
0
-
-
-
Investments/ Other NC assets
0
0
-
0
0
0
Current Assets
152
173
242
352
414
502
Inventories
76
94
122
186
217
259
Sundry Debtors
54
58
98
141
178
212
Cash
5
5
3
1
1
8
Loans & Advances
8
13
15
16
8
9
Other Assets
8
3
5
9
11
13
Current liabilities
27
54
46
77
106
146
Net Current Assets
125
119
196
275
30
8
355
Deferred Tax Asset
1
0
1
1
1
1
Total Assets
150
143
228
304
338
384
Safari Industries|2
QFY2020 Result Update
November 14, 2019
6
Consolidated Cashflow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019 FY2020E
FY2021E
Profit before tax
12
15
33
41
48
67
Depreciation
4
5
6
8
10
12
Change in Working Capital
(29)
4
(81)
(76)
(33)
(41)
Interest / Dividend (Net)
3
4
3
4
12
14
Direct taxes paid
(4)
(5)
(11)
(17)
(12)
(17)
Others
1
2
2
1
0
0
Cash Flow from Operations
(13)
24
(48)
(39)
26
36
(Inc.)/ Dec. in Fixed Assets
(16)
(5)
(14)
(9) (10)
(10)
(Inc.)/ Dec. in Investments
1
(1)
1
3
0
0
Cash Flow from Investing
(15)
(6)
(13)
(6) (10)
(10)
Issue of Equity
7
0
0
1
0
0
Inc./(Dec.) in loans
25
(15)
12
49
0
0
Dividend Paid (Incl. Tax)
0
0
0
0
(3)
(4)
Interest / Dividend (Net)
(3)
(4)
48
(5) (12)
(14)
Cash Flow from Financing
30
(18)
59
43
(15)
(19)
Inc./(Dec.) in Cash
2
(0)
(2)
(2) 0
7
Opening Cash balances
3
5
5
3
1
1
Closing Cash balances
5
5
3
1
1
8
Safari Industries|2
QFY2020 Result Update
November 14, 2019
7
Key Ratio
Y/E March
FY2016
FY2017 FY2018 FY2019
FY2020E
FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
163.7 122.0
60.0
46.8
35.1
25.4
P/CEPS
141.7 111.8
61.2
47.1
36.4
27.1
P/BV
17.6
15.9 9.5 8.2
8.4 6.8
Dividend yield (%)
0.0
0.1 0.1 0.2
0.2 0.3
EV/Sales
4.8
3.7 3.2 2.4
1.8 1.5
EV/EBITDA
71.7
58.4
32.5
26.3
20.1
15.1
EV / Total Assets
8.8
9.1 5.8 4.5
4.1 3.6
Per Share Data- `
EPS (Basic)
3.5
4.7 9.5 12.2
16.2
22.4
EPS (fully diluted)
3.5
4.7 9.5 12.2
16.2
22.4
Cash EPS
5.3
6.7
12.2
15.9
20.6
27.7
DPS
0.2
0.4 0.8 1.0
1.4 1.9
Book Value
42.6
47.0
79.1
91.5
89.5 110.0
Returns (%)
ROCE
9.4
11.8
14.9
14.3
19.3
22.6
Angel ROIC (Pre-tax)
9.7
12.2
15.1
14.3
19.4
23.2
ROE
8.2
9.9
12.0
13.3
18.1
20.4
Turnover ratios (x)
Asset Turnover (Gross Block)
6.6
13.0
10.7
13.2
14.0
14.3
Inventory / Sales (days)
100
95
107
117
105
104
Receivables (days)
71
59
86
89
86
85
Payables (days)
60
123
88
109
115
120
Working capital cycle (ex-cash) (days)
111
32
105
98
76
69
Source: Company, Angel Research
Safari Industries|2
QFY2020 Result Update
November 14, 2019
8
Research Team Tel: 022
-
39357800 E
-
mail: research@angelbroking.com Website: www.angelbroking.com
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Disclosure of Interest Statement
Safari
Industries
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to -15%) Sell (< -15%)