PL Sector Report - Luggage - Sector Update – Is 1Q slowdown a momentary blip?
Luggage - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd
Sector Update – Is 1Q slowdown a momentary blip?
Luggage sales is typically linked to travel and weddings. Our checks reveal demand was a bit subdued in 1QFY24 despite non-suburban rail (PRS + non-PRS) and aviation traffic increasing 32% and 19% YoY in April & May 2023 (data for June is not out as yet).
Exhibit 1: Non-suburban (PRS + Non-PRS) rail traffic is up 32% YoY in April-May 2023
| Particulars (In mn) | 2022 | 2023 | YoY growth |
| April | 175.9 | 231.9 | 32% |
| May | 202.6 | 266.3 | 31% |
| Total | 378.4 | 498.2 | 32% |
Data Source: Indian Railways
Exhibit 2: Domestic aviation traffic is up 19% YoY in April-May 2023
| Particulars (In mn) | 2022 | 2023 | YoY growth |
| April | 10.5 | 12.9 | 23% |
| May | 11.5 | 13.2 | 15% |
| Total | 22 | 26.1 | 19% |
Data Source: DGCA
Thus, prima facie, it appears current slowdown was led by weddings. In 1QFY24, there were only 23 auspicious wedding days (lowest since FY19) as per Hindu calendar leading to lower luggage spends. However, we believe this could be a momentary blip as 4QFY24 has 30 auspicious wedding days (highest since FY19). A brief trend on auspicious wedding days over the last few years is given in the table below: -
Exhibit 3: 1QFY24 has lowest count of auspicious wedding days as per Hindu calendar
| Particulars | 1Q | 2Q | 3Q | 4Q | Total |
| FY19 | 29 | 5 | 1 | 27 | 62 |
| FY20 | 43 | 5 | 19 | 26 | 93 |
| FY21 | 27 | 0 | 9 | 0 | 36 |
| FY22 | 43 | 6 | 19 | 16 | 84 |
| FY23 | 37 | 6 | 6 | 28 | 77 |
| FY24 | 23 | 0 | 12 | 30 | 65 |
Data source: Drikpanchang
Our view: We believe slowdown in 1QFY24 can be partially attributable to lower number of auspicious wedding days. Further, though the count of auspicious days is highest in 4QFY24, the figure is not materially different from past (except 4QFY21 and 4QFY22 which has materially lower days) indicating there could be some slowdown in luggage spends for the year. Currently, we expect VIP/Safari to report top-line growth of 9%/19% YoY respectively in FY24E. We would await actual performance of 1QFY24 (trend of market share movement will be evident) and management commentary before we revise our estimates. Maintain BUY on VIP and Safari with a TP of Rs866 and Rs3,202 respectively.
V.I.P. Industries (VIP IN)
Rating: BUY | CMP: Rs606 | TP: Rs866
Key Financials - Consolidated
| Y/e Mar | FY22 | FY23 | FY24E | FY25E |
| Sales (Rs. m) | 12,895 | 20,823 | 22,770 | 25,408 |
| EBITDA (Rs. m) | 1,444 | 3,138 | 3,962 | 4,675 |
| Margin (%) | 11.2 | 15.1 | 17.4 | 18.4 |
| PAT (Rs. m) | 669 | 1,846 | 2,451 | 2,993 |
| EPS (Rs.) | 4.7 | 13 | 17.3 | 21.1 |
| Gr. (%) | NA | 175.3 | 32.8 | 22.1 |
| DPS (Rs.) | 2.5 | 4.5 | 4.5 | 4.5 |
| Yield (%) | 0.4 | 0.7 | 0.7 | 0.7 |
| RoE (%) | 12.4 | 30.7 | 33.5 | 31.8 |
| RoCE (%) | 8.6 | 25.9 | 29.4 | 30.3 |
| EV/Sales (x) | 6.8 | 4.3 | 3.9 | 3.5 |
| EV/EBITDA (x) | 61 | 28.3 | 22.4 | 18.8 |
| PE (x) | 128.1 | 46.5 | 35 | 28.7 |
| P/BV (x) | 15.3 | 13.4 | 10.4 | 8.1 |
Safari Industries (India) (SII IN)
Rating: BUY | CMP: Rs2,974 | TP: Rs3,202
Key Financials - Consolidated
| Y/e Mar | FY22 | FY23 | FY24E | FY25E |
| Sales (Rs. m) | 7,057 | 12,120 | 14,363 | 16,816 |
| EBITDA (Rs. m) | 552 | 1,969 | 2,456 | 2,892 |
| Margin (%) | 7.8 | 16.2 | 17.1 | 17.2 |
| PAT (Rs. m) | 316 | 1,251 | 1,583 | 1,898 |
| EPS (Rs.) | 14.1 | 52.8 | 66.8 | 80 |
| Gr. (%) | NA | 273.2 | 26.6 | 19.9 |
| DPS (Rs.) | 0.8 | 3.5 | 4 | 4 |
| Yield (%) | 0 | 0.1 | 0.1 | 0.1 |
| RoE (%) | 10.9 | 34.4 | 31.7 | 28.6 |
| RoCE (%) | 10.4 | 35.5 | 32.6 | 30.9 |
| EV/Sales (x) | 9.4 | 5.9 | 4.9 | 4.1 |
| EV/EBITDA (x) | 120.5 | 36.1 | 28.7 | 24.1 |
| PE (x) | 210.4 | 56.4 | 44.5 | 37.2 |
| P/BV (x) | 22.1 | 16.6 | 12.3 | 9.3 |