Safari Industries Q1 Results Review - Growth Engine Slows Down; Albeit Temporarily: Prabhudas Lilladher

Prabhudas Lilladher Report

We cut our earning per share estimates by 6%/1% for FY25E/FY26E as we fine tune our gross margi assumptions in light of rising competitive intensity. Safari Industries India Ltd. reported a subdued performance with gross margin of 44.5% (our estimate 47.0%) as pricing strategy had to be re-aligned to protect market share in a weak demand environment that witnessed aggressive discounting by a leading player.

While pricing pressure might prevail in near term we believe Safari will be in a better position to counter this challenge once greenfield plant at Jaipur begins operations in Q3 FY25E. Progress at the site is satisfactory and capex of ~Rs 300-350 million has already been incurred in Q1 FY25.

Operationalisation of new plant will bring in cost competitiveness by optimizing freight & power cost enabling Safari to compete better at mass end of the curve that is most price sensitive.

We maintain our positive stance on the stock and expect sales/profit after tax compound annual growth rate of 21%/24% over FY24-FY26E.

Maintain ‘Buy’ with a target price of Rs 2,476 as we increase our target multiple to 45 times (earlier 43 times) to account for growth and earnings optionality arising from new plant in Jaipur.

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