Buy Symphony: target of Rs1485:: MF Global

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Consumer Durable

Symphony

SYML IN: Buy

Symphony was incorporated in 1988 and is primarily an air cooler company. The company was the first to introduce cooler as a life style product and launched plastic body coolers compared to then available metal coolers.

Focus on core business enabled a turnaround in its fortunes: In its history of more than two decades, Symphony has gone through various stages of development The management made significant efforts to relook at the overall group strategy and business operations. The following initiatives and measures were undertaken by the management: Stick to its core strength, i.e. coolers and geysers, rather than venturing into multiple durable goods. Clear-cut market penetration strategy was adopted. It re-engineered its product design to reduce per-unit cost and improve efficiency.

Strong distribution channel: Symphony has a well-established distribution channel and has been increasing the number of retail outlets.

Strategic international acquisition: Symphony invested in the equity capital of the Singapore-based Sylvan Holdings Pte. Ltd (Sylvan), holding a 49% stake and 100% optionally convertible cumulative redeemable preference shares of Sylvan. Sylvan has invested 99.99% in equity share capital of the Mexico-based Impco. Impco, a 56 year-old company caters to the air cooler needs of the US and Mexico markets. These strategic investments would enable Symphony to penetrate markets in North and Latin America. Further, Impco specializes in manufacturing industrial air coolers which symphony intends to introduce in India, in view of the tremendous domestic scope. Symphony retains the right to hold majority/entire shareholding of SYLVAN

Brand equity than competitors: The Company focuses on establishing a strong brand equity and recall. The company’s advertisement spends as a percentage of sales are higher than comparable consumer durable companies, hence emerged as the most referred generic word for the industry and the product segment.

Strong cash flow & balance sheet – improve payout ratio:Symphony is a debt free company. We believe that the growth prospect led to healthy cash flow for the company in the year to come, which correspondingly translates to higher dividend payout ratio.

Valuation: At the current price of Rs.833, the stock trades at 11.4 xs and 8.4x expected EPS of Rs73 and Rs99 for FY11E-FY12E respectively. The company has zero debt and is cash positive. We believe that Sympony to trade on premium because of its presence in consumer durable segment which is centric to value for money class of customer along  with a higher ROCE and RONW, efficient operations, higher growth over the next two years, strong balance sheet and low cost structure. The Consumer durable index is trading at 19.9 xs on trailing earning. We believe that a discount of 15 x FY12E earning represent fair values on the company based on that we arrive to a price target of Rs1485. So we recommended Buy Rating