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Luggage Industry on the move

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Luggage industry is running on fast track, driven by increasing formalisation of the economy away from the unorganised sector led by introduction of Goods and Service Tax (GST) and a continued shift of consumer preference from unbranded to branded products. The other structural factors driving the industry growth are a rise in consumer demand fuelled by increased air travel, wedding season based purchasing, consumer’s changing lifestyle and improvement in standard of living, increase in disposable income, rising urbanization and Government’s focus to promote tourism.

Good growth was seen across general trade and retail. Hyper market and e-commerce channels continue to grow strongly mainly due to better and convenient shopping experience. The overall outlook for the Travel & Tourism sector was very robust, with domestic air traffic continuing its strong growth at over 17% in 2017. Direct Travel & Tourism industry is expected to grow at 7.1% in India over 2018-2028 period compared to 3.8% growth globally. We have only two listed companies in luggage industry which are enjoying huge market share in branded luggage segment. We are expecting both companies can give superb returns over next 3-5 years.

VIP Industries Ltd.

BSE Code/ NSE: 507880/ VIPIND
Face Value: Rs 2
CMP: Rs 476
52 Weeks H/L: (Rs) 647/ 287.10
Market Cap: Rs (crore): 7033
Promoter’s Holding: 53.46%

Incorporated in 1968, VIP Industries Limited manufactures and sells luggage bags and accessories in India. It offers hard and soft luggage. The company provides its products primarily under the VIP, Caprese, Carlton, Skybags, Alfa, and Aristocrat brands. VIP Industries Limited sells its products through hypermarket channel and company-owned stores. The company exports its products to 31 international locations, including the United Arab Emirates, the United States, Sweden, Qatar, and Kuwait. During Q2FY19, its sales grew by 29.93% to Rs401.78 crore while its PAT zoomed 37.68% to Rs32.81 crore against Rs23.83 crore. The total sales increased by 28.47% at Rs919.59 crore during H1FY19 as against Rs715.79 crore in the corresponding period last year. The PAT stood at Rs96.16 crore during H1FY19 as against Rs64.81 crore during the corresponding period last year, registering a growth of 48.37% over the same period previous year. Stock is trading at PE ratio of 42.6x. One can buy this stock in staggered manner for 15 to 18 months investment horizon.

Safari Industries Ltd.

BSE Code/ NSE: 523025/ SAFARIND
Face Value: Rs 2
CMP: Rs 735
52 Weeks H/L: (Rs) 1,005/ 470.00
Market Cap: Rs (crore): 1730
Promoter’s Holding: 57.64%

Incorporated in 1980, Mumbai based Safari Industries (India) Limited manufactures and trades in luggage and luggage accessories in India. Its products include wheel upright trolleys, duffles, and rolling duffles; business cases, laptop satchels, and tablet sleeves, casual and formal backpacks, and backpack trolleys, as well as travel essentials and foldable items. The company also operates through retail stores, as well as an e-commerce channel. 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 at Halol, Gujarat. Soft luggages are made of fabrics of various kinds and are mainly imported by Safari. The Company has equity of just Rs4.46 crore while it has huge reserve of around Rs168.39 crore. During Q2FY19, net profit soared 78.78% to Rs6.17 crore from Rs3.51 crore in Q2FY18 on 44.49% higher sales of Rs127.39 crore fetching an EPS of Rs2.77. For H1FY19, its PAT grew by 170.35% to Rs18.33 crore from Rs6.78 crore on 45% higher sales of Rs283.45 crore fetching an EPS of Rs8.23. Stock is trading at PE ratio of just 48.7x. One can buy this stock in staggered manner for 15 to 18 months investment horizon.

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