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Revenue in line, driven by higher volumes

Safari Industries (SII) delivered in-line revenue performance in 1QFY27. Revenue grew 11.5% to INR5.9b, supported by ~10% YoY volume growth. EBITDA declined 4.9% YoY to INR754m, while PAT also followed a similar trend, declining 5.4% to INR478m. Higher raw material prices impacted margins in 1QFY27, resulting in gross margin contraction (-120bp YoY). April and May witnessed weaker performance due to subdued wedding-related demand, while growth recovered strongly in June. Our online luggage price tracker indicates that Safari (6% price hike), along with newer D2C brands (Mokobara, HRX), raised prices by 10-20% over the past month. These hikes have been sustained through the current month, a positive read for the sector. We expect SII’s revenue momentum to outpace the industry (16% CAGR), driven by the addition of 0.15m pieces per month of capacity at its Jaipur plant. EBITDA margins are likely to remain in the ~13.5-14.0% range over the next two years. The Board has appointed Mr. Aditya Bhargava (22 years of experience) as the CFO, effective 4th August 2026.

Higher volumes driving growth

SII’s revenue grew 11.5% YoY to INR5.9b in 1QFY27, driven by strong volume growth of ~10% YoY. Raw material costs for Polypropylene/Polycarbonate rose 10-15% due to the West Asia crisis. However, based on our channel checks, the company has taken a price hike of ~6%. Demand during the quarter was impacted by fewer wedding dates (24 days in 1QFY27 vs. 29 days in 1QFY26), primarily due to Adhik Maas. The offline channel delivered low-single-digit growth, while e-commerce (~45%) grew in mid-teens. The premium portfolio forms 5% of sales, and management expects to post a 25%+ CAGR over FY26-28.

Raw material inflation impacting margins

In 1Q, gross margin contracted ~120bp YoY and 480bp QoQ to 44.6% on account of higher raw material prices (Polypropylene- PP and Polycarbonate- PC). EBITDA declined 4.9% to INR754m, with EBITDA margin settling at 12.8% (-220bp YoY and -25bp QoQ). EBIT declined 8.8% to INR564m, primarily due to higher depreciation (+9.2%). PAT declined 5.4% to INR478m despite higher other income (+24.1%) and elevated interest costs (+15.0%). We expect EBITDA margins to settle in the ~13.5-14.0% range over the next two years.

Valuation and view: Reiterate BUY

We expect SII to deliver industry-leading growth and expand its market share by focusing on:

1) building the Urban Jungle brand, along with SI-Select (premium positioning)

2) introducing new SKUs

3) adding 4-5 EBOs every month. We believe SII’s revenue momentum is likely to outpace the industry (16% CAGR), driven by the capacity addition at the Jaipur plant, while EBITDA margins are likely to be in the range of ~13.5-14.0% over the next two years. Though we are confident about SII’s growth story, we expect rising competitive intensity from VIP, Samsonite, and D2C players to impact SII’s growth. We reiterate our BUY rating with a DCF-based TP of INR2,250 (based on an implied P/E of 45x on FY28). Key risks: sudden rise and aggressive discounting by regional competitors.

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