Why is Safari Inds. falling/rising?

Recent Price Movement and Market Context

Safari Industries has experienced a notable correction over the past week, with the stock declining by 3.26%, significantly underperforming the Sensex benchmark which fell by only 0.63% during the same period. This recent weakness contrasts with the stock’s impressive one-month return of 14.62%, which outpaces the Sensex’s 2.27% gain, indicating some volatility in the short term. The stock has also been on a three-day losing streak, shedding approximately 2.9% in that span, and touched an intraday low of ₹2,291.75, marking a 3.8% drop from recent highs.

Despite the recent price softness, Safari Industries continues to outperform its sector by 0.44% on the day, suggesting relative resilience within its industry group. However, the weighted average price indicates that a larger volume of shares traded closer to the day’s low, signalling selling pressure among investors. This is further corroborated by a decline in investor participation, with delivery volumes on 5 Dec falling by 32.2% compared to the five-day average, implying reduced conviction among buyers.

Technical Indicators and Liquidity

From a technical standpoint, the stock’s current price remains above its 20-day, 50-day, 100-day, and 200-day moving averages, which typically signals a positive medium to long-term trend. However, it is trading below its 5-day moving average, reflecting short-term weakness. Liquidity remains adequate, with the stock’s traded value supporting transactions up to ₹0.16 crore based on 2% of the five-day average traded value, ensuring that investors can enter or exit positions without significant price impact.

Long-Term Performance and Financial Strength

Over a longer horizon, Safari Industries has delivered exceptional returns, appreciating by 184.12% over three years and an impressive 709.09% over five years, far outstripping the Sensex’s respective gains of 36.01% and 86.59%. This strong performance underscores the company’s sustained growth and market leadership.

Fundamentally, the company boasts a high return on equity (ROE) of 18.46%, reflecting efficient management and profitable utilisation of shareholder capital. Its low Debt to EBITDA ratio of 0.59 times indicates a conservative leverage position and strong ability to service debt, which reduces financial risk. Furthermore, the company has demonstrated healthy long-term growth with net sales expanding at an annual rate of 37.37% and operating profit growing by 74.42%, highlighting robust operational performance and scalability.

Balancing Short-Term Volatility with Long-Term Strength

The recent decline in Safari Industries’ share price appears to be driven primarily by short-term profit-taking and reduced investor participation rather than any fundamental deterioration. The stock’s underperformance relative to the Sensex over the past year and year-to-date period, with returns of -11.72% and -9.17% respectively, contrasts with the benchmark’s positive gains, suggesting some cyclical or sentiment-driven pressures. However, the company’s strong financial metrics and consistent growth trajectory provide a solid foundation for recovery and future appreciation.

Investors should weigh the current dip against the company’s demonstrated ability to generate high returns on equity, maintain low leverage, and sustain rapid sales and profit growth. The technical positioning above key moving averages also supports the view that the recent weakness may be temporary within a broader uptrend.

In summary, Safari Industries is experiencing a short-term price correction amid lower trading volumes and some profit-taking, but its strong fundamentals and long-term performance record continue to make it a compelling holding for investors with a medium to long-term horizon.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →