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Writer's pictureShekhar Yadav

VIP Industries Vs Safari Industries- Q2 FY19 result comparison

Given that Indian luggage industry being an oligopolistic one, to decide on the investment, one needs to go through the comparison between the 2 listed player i.e. VIP industries Vs Safari industries. Both the listed company in the Indian Luggage industry came out with their result in the last 10 days. Let’s analyse where they stand with respect to the Q2 FY19 result.

The Indian luggage industry is highly seasonal in nature, that’s why there is no point comparing QoQ results. So, I will just go through the YoY result.

I would suggest you to read my article on Indian Luggage industry to make more sense of the below.

Both Safari Industries & VIP Industries import almost all of their soft luggage from China. That part of business is totally traded. That’s why both these companies  have a longer inventory holding period of 5 to 6 months.

Also, one important point needs to be noted that all the import transaction takes place in Dollar terms. And during these 6 months i.e. April’18 to Sept’18 Rupee depreciated by more than 12%. This will have some kind of adverse impact on the margins.

VIP industries in the recent past have set up a Bangladesh subsidiary to mitigate the China risk i.e. import duty & rising costs in China. The Bangladesh subsidiary contributed about ₹50 cr to sales in H1 FY19.

VIP Industries Vs Safari Industries- Q2 FY19 result comparison

VIP Industries Vs Safari Industries- Q2 FY19 result comparison

Safari Industries- Q2FY19 analysis(Manufacturing cost= Import cost of finished goods + Manufacturing cost of Hard luggage)

VIP Industries Vs Safari Industries- Q2 FY19 result comparison

VIP Industries- Q2FY19 analysis(Manufacturing cost= Import cost of finished goods + Manufacturing cost of Hard luggage)

VIP Industries Vs Safari Industries- Q2 FY19 result comparison

VIP Industries conference Call

The Indian luggage industry is having its best time ever with a fantastic growth demand. But the two “C” :Crude Oil and Currency, put a speedbreaker to the journey.

The quarter went by was tough for luggage manufacturer as they import all of their soft luggage. The rapid currency depreciation played a spoilsport.

Also, the hard luggage is made from crude oil derivative, the impact was on the this segment as well.

Although the revenue growth for Safari industries for this quarter again is exciting, the profitability growth is not so much. This is evident from the growing COGS, implying Safari is not able to pass on the cost. 

In order to be able to pass on the cost, brand building is a must where one needs to advertise. Given that Safari is still pushing its growth in the bottom of the organized segment with discounts, the margin improvements scope seems bleak.

VIP industries with its strong brand name and focus on sales growth but not at the cost of margins, still seems a better bet.  

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Shekhar Yadav

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