Safari Industries, which was less than half the size of VIP Industries in February this year, has surpassed the market capitalisation of latter, as investors continue to bet on its sustained revenue growth and improved market share. At Tuesday’s close, the market valuation of Safari Industries stood at Rs 9,851 crore, which is Rs 429 crore higher than that of VIP Industries.

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The market share of Safari has more than doubled to 23.3 percent in financial year 2022 from 10.1 percent in financial year 2015. That compares with nearly six percentage points decline witnessed by VIP during the same period. At the end of FY22, VIP had a market share of 42.5 percent.

Shares of Safari Industries, which climbed to fresh record high on Tuesday, have yielded nearly 150 percent so far in 2023, against marginal decline clocked by those of VIP Industries. While the net profit of VIP Industries declined 16.4 percent to Rs 58 crore in the first quarter of financial year 2024, the bottom-line of Safari Industries surged 88 percent to Rs 50 crore during the same quarter.

The weak operational performance at VIP Industries was due to fire at its Bangladesh subsidiary and increased competition. "The disruption at Bangladesh not only resulted in short supply of some of our key ranges in soft luggage, which impacted the VIP and Skybag revenues for the quarter, but also the lower production has unfavorably impacted our gross margin, and this is due to the under-absorption of the manufacturing overheads at Bangladesh," the company said post the first quarter results.

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On the other hand, analysts have turned more bullish on Safari Industries. The stock with 90 percent “buy” ratings has more than doubled between January and now after gaining nearly 90 percent in 2022. The stock had returned 72 percent in 2021 as well.

Analysts at B&K Securities expect, Safari Industries to grow revenues and adjusted profit after tax (PAT) by 25.6 percent and 25.8 percent, respectively over FY23-25E driven by the company’s strong focus on faster-growing segments such as backpacks and hard luggage. Moreover, the company expects to outpace industry growth by 5 -10 percent in the financial year 2024, and to deliver better numbers in second-half compared to the first half of the financial year.

Analysts at B&K Securities observed, the current 56 percent share held by organised players to further increase to 70 percent over the next seven years, with a yearly increment of two percent of market share for organised players.

In fact, Safari’s FY23 sales are now 58 percent of VIP’s FY23 sales, which used to be less than 30 percent in financial year 2018.

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(Edited by : Asmita Pant)