Motilal Oswal expects revival in luggage sector; retains Buy on VIP, Safari

Motilal Oswal expects improved margin stability across the sector, aided by moderation in discounting and a strategic shift towards profitability

Motilal Oswal on Luggage Industry: Domestic brokerage Motilal Oswal Financial Services (MOFSL) remains positive on India’s luggage industry, which is estimated at around ₹170 billion in calendar year 2024 (CY24) and is expected to grow at around 12 per cent by FY27. The brokerage noted that the organised segment, which accounts for nearly 54 per cent of the market, continues to be highly consolidated, with the top three players controlling over 80 per cent market share, led by Safari and VIP Industries. 

 

However, MOFSL highlighted that sector profitability has remained under pressure over the past few years due to aggressive discounting, particularly on e-commerce platforms, alongside persistent weakness in the retail channel. 

 

Going ahead, the brokerage expects improved margin stability across the sector, aided by moderation in discounting and a strategic shift towards profitability, especially following recent management changes at VIP Industries. MOFSL remains constructive on the industry and maintains a ‘Buy’ rating on Safari Industries and VIP Industries.

VIP: Discounting remains elevated; turnaround likely in FY27

According to analysts, VIP is currently navigating a transition phase, with full transformation expected to materialise over the next 6-9 months. The new management is expected to prioritise profitability over aggressive cash burn in pursuit of market share. 

 

The company's key strategic initiatives include a celebrity-led marketing campaign to strengthen brand recall, product upgrades with differentiated features such as the Smart BagTag, rationalisation of low-return exclusive brand outlets, and a turnaround of the Bangladesh manufacturing facility. 

 

For the December 2025 quarter (Q3FY26), the company expects mid-single-digit revenue growth, supported by the wedding season, with operating margins seen in the 4-6 per cent range. Despite near-term pressures, revenue and Ebitda are projected to grow at a CAGR of 6.8 per cent and 68 per cent, respectively, over FY25–28E, the brokerage said in its note. 

 

MOFSL has retained a 'Buy' rating with a target price of ₹490, valuing the stock at 50x Sep’27E earnings. 

 

It also highlighted rising local competition, a sharp increase in input costs, and prolonged disruption at the Bangladesh plant among key risks for the company.  ALSO READ| Motilal Oswal starts Nykaa coverage, sees growth but near-term gains capped

Safari: Consistent performer; discounting moderates sequentially

According to MOFSL, Safari Industries is expected to outperform the broader luggage industry, with revenue, Ebitda, and PAT projected to grow at CAGRs of 16.0 per cent, 24.6 per cent and 26.4 per cent, respectively, over FY25–28E. The growth is expected to be driven by higher capacity utilisation at its Jaipur facility, which has the potential to generate up to ₹10 billion in revenue at full utilisation, along with margin recovery, expansion of its premium portfolio, and steady addition of 4–5 exclusive brand outlets every month. The brokerage expects gross and Ebitda margins to improve to around 47 per cent and 15 per cent, respectively.  For Q3FY26, Safari is likely to post mid-teens revenue growth, supported by the wedding season, with operating margins seen above 15 per cent, the brokerage said.

  Motilal Oswal has reiterated its 'Buy' rating on the stock with a DCF-based target price of ₹2,700, valuing it at 50x Sep’27E earnings. The brokerage highlighted heightened competitive intensity and any renewed increase in discounting across the sector as key risks.