Safari Industries Q2 Results Review - Margins Squeezed By Price Wars: IDBI Capital

IDBI Capital Report

Safari Industries India Ltd.’s Q2 FY25 sales grew 24% YoY to Rs 4.5 billion, driven by strong volume growth of 40% YoY. However, realization declined ~16% YoY due to heavy discounting aimed at countering price competition.

Consequently, gross margin contracted by 166 bps YoY to 43.8%, due to higher input cost. Ebitda fell by 24.5% YoY to Rs 479 million, with Ebitda margin contracting by 669 bps YoY to 10.5%, primarily due to higher advertising and promotion spend for Urban Jungle (Rs 50 million) and support for ECOM channel (Rs 100 million).

Management expect higher A&P spend of Rs100mn to continue in Q3 FY25 and expect H2 FY25 performance to better than H1 FY25 in terms of top-line and margins. PAT fell by 25% YoY to Rs 297 million, aided by lower tax rate.

We cut our FY25E EPS estimate by 13% and value the stock at a PER of 50 times FY26E EPS to derive a target price of Rs 2,535. We maintain Hold rating.

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