Safari Industries: Expansion under way
According to Prabhudas Lilladher, the Halol capacity expansion of Rs 250 mn is on track for completion by Dec-2022 and optimum utilization is expected from March/April 2023. Post expansion, HL capacity will increase to 0.5mn pieces per month. Rising share of own manufacturing is likely to structurally elevate GM profile (delta can be 200-300bps) of Safari by eliminating freight cost and reducing currency volatility. Commenting on the margins, the brokerage said that gross margin in 2HFY23E is likely to be better, given decline in raw material prices and liquidation of high cost inventory in 1HFY23. “Further, sea freight has also declined and supply side issues have gradually been sorted out which should aid margins,” the brokerage has said.
Safari Industries: Buy with a price target of Rs 2457
Safari trades at 31x/24x our FY24E/FY25E EPS estimates and acts as a perfect proxy to play on the brand affinity aspirations of Indian middle class, as product positioning is right at the doorstep of organized market. Shrinking share of unorganized players post-COVID and strong foothold in the mass/value segment is expected to result in above average industry growth in foreseeable future. Retain ‘BUY’ with a revised target price of Rs 2,457 (38x Sep-24 EPS; no change in target multiple) as we keep our estimates unchanged,” the brokerage has said.
VIP Industries
VIP Industries is another stock from the travel sector, where Prabhudas Lilladher has a “buy” call. “VIP Industries had outlined capex plan of Rs1bn for FY23E and the expansion plan is on track. Out of Rs1bn, roughly Rs 0.6bn/Rs 0.4bn is earmarked for HL/SL capacity expansion. Post expansion, HL capacity is likely to rise from ~5 lacs units per month to ~7 lacs units per month, while SL capacity is likely to rise from ~7 lacs units per month to ~10 lacs units per month. Rising share of own manufacturing is likely to structurally elevate GM profile of VIP, as it will eliminate freight cost and reduce currency volatility,” the brokerage has said.
VIP Industries: Target price of Rs 1009 on the stock
“We keep our estimates unchanged and remain positive on long term prospects of VIP given 1) steady improvement in market share (~400 bps gain in last 1 year) 2) reduced reliance on China & rising self-sufficiency in own manufacturing (~70-75% contribution expected in FY23E) and 3) emergence of new twin levers viz; handbags and exports. We expect sales/PAT CAGR of 15%/27% over FY23E-FY25E and retain ‘BUY’ with a target price of Rs 1,009 (45x Sep-24E
EPS; no change in target multiple),” the brokerage has said in its report.
Disclaimer
The stocks have been picked from the brokerage reports of Prabhudas Lilladher Pvt Ltd. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.
