Rs 400 to Rs 3,600: 8x multibagger return in 3 years! What's next for this small-cap stock?

Safari Industries stock was trading at around the Rs 400 mark in August 2020. The multibagger stock hit its all-time high of Rs 3602.15 on August 21, 2023. It has delivered around 800 per cent return in the last three years and has zoomed over 140 per cent in just one year.

About Safari Industries

Safari Industries is in the business of manufacturing and trading luggage and luggage accessories. There are two broad categories of luggage, i.e. hard luggage and soft luggage. Hard luggage is mainly made of Poly Propylene (PP) and Poly Carbonate (PC) and manufactured in-house by Safari at its Plant located in Halol, Gujarat. Soft luggage is made of fabrics of various kinds and is mainly imported by Safari.

Safari Industries: Q1 Performance

The company's net profit jumped over 88 per cent to Rs 49.94 crore for the first quarter as compared to Rs 26.59 crore last year. The company's total revenue stood at Rs 426.68 crore in Q1FY24, up 46 per cent from Rs 293.04 crore in the year-ago quarter. The EBITDA margin grew to 18.5 per cent from 14.2 per cent in the corresponding quarter of the previous fiscal.

What's next?

Technical check: According to Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One, Safari Industries is on a secular uptrend, hovering in the cycle of higher highs – higher lows on all chart frames.

"The stock has seen a strong spurt in the price action post the consolidation breakout near the 3000 mark and has entered the over-bought territory on the technical parameters. Any dip towards the mentioned zone is likely to augur well for the bulls in the counter and till it is sustained, the stock is expected to continue its upwards trend in the uncharted territory," he added.

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Fundamental check: "With returns of almost 110 per cent on a year-to-date basis, Safari Industries has seen a tremendous dream run that amply demonstrates the stock's appeal to investors. It has been a significant wealth creator this year, supported by good performance that can be linked to its growing market position and generally increased margins," said Aamar Deo Singh, Head of Advisory at Angel One.

"Safari Industries is still a good investment option with strong earnings momentum anticipated to last in the coming years. However, buying on corrections should be looked at by investors, given the sharp run-in recent times," Singh added.

Prabhudas Lilladher has maintained its positive stance on Safari as consistent gain in market share and rising share of indigenous manufacturing is likely to result in sales/PAT CAGR of 24/31 per cent over FY23-FY25E.

The brokerage has a 'Buy' rating on the small-cap stock with a target price of Rs 3,728. The additional capacity of 125,000 units per month has come on stream from August 1, 2023, which is likely to cushion gross margins further as it would reduce reliance on outsourcing, it said.

Disclaimer: The stocks mentioned in the story are for information purposes only. Investors or market participants should consult their financial advisors before taking any position.

 

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