Safari Industries - Risk-reward turns favourable - Company update

Safari Industries reported a strong Q4FY26, as results exceed our estimates, driven by healthy year-end sales and lower sales returns. Despite elevated raw material prices, gross margins remained largely stable YoY, though operating margins witnessed pressure due to higher other expenses. Offline channel continued to deliver double-digit growth, while e-commerce growth was relatively softer at mid-to-high single digits. In addition to a ~5–6% price hike implemented towards the end of Apr’26, the company is expected to take additional price increase in the ensuing quarter to mitigate ~10% raw material inflation. We had earlier downgraded the stock to Reduce given the evolving situation at that time, including rising competitive intensity, D2C disruption and margin pressure. At current levels, with changing business conditions and Safari’s strong brand recall, established offline distribution, potential for further price hikes, and emerging supply-chain constraints for D2C players, we believe that the risk-reward has turned favourable. Hence, we are upgrading the stock from Reduce to BUY.

Strong Revenue growth:

Revenue stood at Rs 4,733mn, up 12.4% YoY (down 7.6% QoQ), came ahead of our estimate (MNCL Est- Rs 4,569mn). Growth was supported by healthy year-end sales, lower sales returns and strong volume growth of ~15% YoY. Channel-wise, the offline business continued to deliver double-digit growth, while e-commerce grew at a relatively moderate mid-to-high single digit rate amid higher competitive intensity from D2C players.

Gross margins are largely stable:

The company reported a gross margin of 49.3% up 11bps YoY (+283bps QoQ), despite elevated raw material prices in key inputs such as PP and PC. however, OPM contracted by 139bps YoY to 13.1% (+220bps QoQ) (MNCL Est- 9.3%), largely on account of increase in other expenses (+90bps YoY) and employee cost (+60bps YoY).  EBITDA stood at Rs 618mn, up 1.6% YoY, ahead of our estimate (MNCL Est- Rs 423mn), with higher operating expenses restricting overall EBITDA growth.  The Company reported a PAT of Rs 375mn, flat YoY. Safari has recently taken a price of close to 5 to 6% in April to counter the increase in raw material prices (~10%).

Outlook:

We expect Safari to deliver industry-leading growth ahead, supported by strong volume momentum, continued market share gains and expansion in its core offline channel. Q1FY27 has also started on a healthy note, with double-digit volume growth, indicating sustained demand momentum. Capacity addition remains a key growth lever, with the Jaipur plant currently operating at ~80% utilization and the company planning to add ~0.15mn units of monthly capacity over the next three months. Along with this, focus on broadening the SI Select/premium portfolio and regular EBO additions should aid sustained growth over FY26–28E. While raw material inflation and competitive intensity from D2C players remain near-term monitorable, recent price hikes, scope for further pricing action and improving operating leverage should support margin recovery

Valuation, view and Risk:

Though Q4FY26 performance came in ahead of our estimates, we have largely retained our earnings as our FY27/28E estimates already factors in the positives. We expect Safari Industries to deliver revenue/EBITDA/PAT CAGR of 16%/20%/22% over FY26–FY28E, driven by strong volume growth, capacity addition, continued offline channel traction and gradual margin recovery. We value the stock at 35x FY28E EPS of Rs 51, arriving at a TP of Rs 1,795. Given attractive valuations, the improved risk-reward, better demand momentum and potential margin recovery, we upgrade the stock to BUY from Reduce. Key risks include sustained increase in raw material prices and higher competitive intensity from D2C players.

Company website: https://safaribags.com/

Click to download the full Safari Industries (India) Ltd Q4FY26 Company Update

Analyst:

• Rahul Dani - Research Analyst, Institutional Equities (NISM-201500034725)
• Vaidik Bafna - Research Associate, Institutional Equities (NISM-202100035711)

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FAQs on Safari Industries Ltd Q4FY26 Company Update

These FAQs highlight key insights from MNCL’s institutional equity research on Safari Industries, covering growth outlook, key drivers and risks for investors.

What drove Safari Industries’ Q4FY26 performance?

Safari Industries reported strong Q4FY26 growth led by healthy year-end sales, lower sales returns, strong offline demand and continued market share gains in the luggage segment.

How are margins performing despite raw material inflation?

Gross margins remained stable despite elevated PP and PC raw material prices. The company implemented price hikes and expects operating leverage along with further pricing actions to support margins.

What are the key growth drivers for Safari Industries?

Key growth drivers include strong offline expansion, premium product launches, capacity additions, rising travel demand and continued market share gains across India’s organized luggage market.

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