More Sales, More Comfort for India's Luggage Makers | CORPORATE ETHOS

More Sales, More Comfort for India’s Luggage Makers

By: | March 20, 2018
Luggage Makers

Growth of travel infrastructure, national highways, airports, railways stations and people spending more time and money for leisure travel have led to a booming luggage industry in India. The sector has witnessed a compounded annual growth rate (CAGR) of 18% from 2013-14 to 2017-18.

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The market has evolved from a utilitarian, functional role to that of a lifestyle product. Indian luggage market is estimated at Rs 9000 cr and dominated by unorganized players with branded players accounting for 25% share. The 52% of the organized market is led by VIP Industries while 45% is accounted for by Samsonite. The market continues to be dominated by a large number of regional unbranded players in the unorganized segment.

The market can be broadly classified into travel, business and casual bags with growth seen more in backpacks and handbags for ladies.

Amidst the positive trends in luggage market, here is a look at the prospects of listed players:

#VIP Industries Ltd (BSE: 507880, NSE: VIPIND)  Category: Mid Cap

VIP Industries Ltd was established in 1971 when it manufactured its first suitcase. It has now sold over 60 million pieces of luggage both hard and soft with the objective of making travelling simple.  VIP sells its products through 8000 retail outlets, 1300 retails in 27 countries. Product range includes Injection moulded PP cases and furntiture, vacuum formed PC and ABS cases and soft sided luggage in nylon, polyester and EVA material. The company owns the major brands Skybags, Caprese lady bags, VIP bags, Alfa and Aristrocrat brands.

Under the leadership of Radhika Piramal, Managing Director, the company reported total income of Rs 1283 cr in 2016-17 compared to Rs 1209 cr the previous year. The net profit rose from Rs 66 cr to Rs 88 cr.
The company is a market leader in backpack segment with its Skybags brand while its Caprese is a leader in lady bags segment.

In December quarter, the net profits rose 73.15% annualized to Rs 26.89 cr while sales rose 10.21% to Rs 337.99 cr.  The scrip has given a six month return of 21.98% while one year returns were much higher at 78.23%.

Financial parameters gives a mixed picture with a return on equity of 20.53%, return on assets of 15.49% which are above industry average while net profit margin of 6.57% is below peer average. Liquidity is cause for concern while cash flow is better. The scrip is trading at a price earnings ratio (PE) of 42 indicative of moderate valuation by the market.

On technical charts, relative strength index (RSI) of 32.72 is bearish, ADX of 24 indicates range bound trade and MACD has witnessed a bearish crossover indicating selling opportunity.
Target : 326     Duration : 3 weeks.

#Safari Industries (India) Ltd (BSE: 523025, NSE: ) Category: Small Cap

Safari Industries Ltd was set up in 1980 and is in the business of manufacturing and trading of luggage and luggage accessories. It has hard and soft luggage in its portfolio. Hard luggage are made of Poly propylene (PP) and Poly carbonate (PC) manufactured in-house by Safari at its plant located in Halol, Gujarat. Soft luggage are made of fabrics of various kinds and imported. The company is led by Sudhir M Jatia, Chairman and Managing Director who was previously managing director of VIP Industries Ltd. The company is the third largest manufacturer of luggage after Samsonite and VIP. Four years ago Tano Capital LLC had bought a 25% stake in Safari Industries by investing Rs 50 Cr.

In 2016-17 the company reported better financials with gross sales of Rs 393.52 cr as compared to Rs 303.38 cr the previous year while net profit rose to Rs 9.71 cr compared to Rs 7.80 cr the previous year.
In Q3FY18, net profit rose 117.62% to Rs 6.78 cr while sales rose 8.97% to Rs 103.44 cr. The scrip is trading at a PE of 69.46 indicating high valuation by market.

It has provided a half yearly return of  52.35% above industry average and Nifty while annual return of 110.93% is also commendable. On financial parameters, it is trailing industry average with return on equity of 9.84%, assets of 4.96% and net profit margin of 2.74%.  it also doesn’t fare well in liquidity and cash flow ratios.
The company posted a CAGR of 42% in revenue and 46% in net profit ove r2012-17. The company has a market share of 14% in the Rs 2600 cr branded luggage market.

On technical charts,  RSI of 49 indicates neutral trend, while ADX of 9.81 indicates tight range bound trade while MACD has witnessed a slightly bearish crossover signaling a selling opportunity.
Target: 540       Duration: 2 weeks.

#Aristocrat Luggage Ltd  (Not listed)

The premier luggage manufacturer was merged with VIP Industries Ltd and the brand is now owned by VIP and sold as Aristocrat.

#Samsonite South Asia Pvt Ltd (Not Listed)

Samsonite is a leading global luggage brand established in 1910 by Jesse Shwayder and has become a leader in travel expanding the vision of its founder. The company has the vision to be the world’ s most highly regarded premium lifestyle travel brands.  It has been a pioneer in setting new trends in luggage world wide with its Attacie case, it also introduced the first polypropylene case whose structure was supported by injection moulded shells. It also introduced the award winning Oyster case in 1980’s and suitcase with wheels in 1990s. in 2010’s it launched the lightweight luggage Cosmolite which was also the strongest.

It is present in the product categories of luggage, backpacks, business bags, duffles, wallets and belt and travel accessories posing a stiff competition to market leader VIP Industries. It is a premium player and carved a niche in the premium segment after talks of JV with VIP Industries was refused by the latter.

Other brands

With the expanding market, more global players have entered the scene-Da Milano, Delsey, Tommy Hilfiger, Clubb International to name a few. Da Milano is launching sub-brand of handbags and accessories. It has 58 stores located in 17 cities and target is 100 outlets in next five years.

Summary
The Indian luggage market has witnessed annual growth of 13 percent in the past decade while in the recent past the growth has risen to 18% showing the tremendous growth opportunity available. Apart from retailing, major brands have also taken the e-commerce route by lsiting in Jabon, Flipkart, Amazon, Shopclues, Snapdeal, Junglee, Myntra etc.  The major brands have also set up its own online portal to tap the growing e-commerce market. With implementation of GST and premiumization of the market, branded players stand to gain. Investors may gain out of selective exposure to the luggage market.