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Carlton to solidify premiumization

Safari Industries (SII IN) has entered into a 20-year exclusive licensing agreement with Carlton Retail Private to market and distribute ‘Carlton’ luggage in India. We view this as a strategic move that will accelerate SII’s premiumization roadmap while limiting capital risk. The deal structure enables SII to strengthen its brand architecture, bridge portfolio gaps in the premium segment and improve relative competitive positioning against D2C brands. Instead of a capital-heavy acquisition, SII adopts a licensing model, preserving balance sheet flexibility. Cash & cash equivalent (INR 2.0bn in H1FY26) provides adequate liquidity to fund the INR 995mn refundable security deposit and support incremental brand-building investments. SII gains the right to sell Carlton effective 1 June, following VIP’s exit from the brand. We remain constructive on SII’s long-term growth outlook, underpinned by premium portfolio scaling, realization-led growth, and margin expansion supported by backward integration. Accordingly, we raise our estimates by 3.0%/5.3% for FY27E/FY28E and TP to INR 3,248, valuing SII on 35x FY28E EV/EBITDA. Retain BUY

Carlton addition to unlock realization-led growth: Under the agreement, SII will pay an interest-free refundable security deposit of INR 995mn in tranches and an annual royalty of 5% of net sales (or INR 4.5 mn, whichever is higher). The 20-year tenure provides long-term growth visibility, enabling SII to scale the brand through distribution expansion, premium product launches, deeper online penetration, and higher-ASP offerings that improve realizations and product mix. It also helps bridge the gap between volume and value growth, providing an incremental lever to capture rising aspirational demand. The royalty structure aligns payouts with performance, ensuring scalability as revenues ramp up in a competitive market dominated by D2C brands. We expect a revenue CAGR of 17.4% in FY25-28E, led by product innovation, deeper distribution and market share gain in the mass segment.

Embarking on margin-accretion path: We expect the Carlton licensing arrangement to be margin accretive in the medium term, further augmenting SII’s premium portfolio alongside Safari Select, Urban Jungle and Genie. Operating leverage from SII’s distribution network, sourcing strengths and backward integration capabilities will support margin expansion in the long term. We expect EBITDA margins to improve to 13.6% in FY26E, 14.6% in FY27E and 15.3% in FY28E

Maintain BUY, with TP raised to INR 3,248: We expect revenue/EBITDA/PAT CAGRs of 17.4%/24.8%/27.0% in FY25-28E. We believe SII will gain market share through product innovation, premiumization, capacity expansion, in-house manufacturing-led supply chain and widening distribution across online and offline. Carlton licensing strengthens SII’s premium portfolio and supports long-term margin expansion, though further clarity on brand positioning and scale-up strategy would enhance earnings visibility. Accordingly, we raise our estimates by 3.0%/5.3% for FY27E/FY28E and TP to INR 3,248 (INR 3,111 earlier), valuing SII on 35x FY28E EV/EBITDA. We maintain BUY. Key risks are change in consumer preference for hard luggage, increase in competitive intensity and a sharp rise in raw material price

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