Beats estimates… • Symphony :: ICICI Securities

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Beats estimates…
• Despite the off season, Symphony recorded another stellar
performance in Q2FY15 wherein standalone revenues increased
notably by ~31% YoY to | 151 crore led by strong volume growth of
27% YoY. Domestic sales witnessed strong growth of 33% YoY
whereas exports sales grew ~10% YoY. The company has an
organised market share of more than 50% with the top three brands
constituting ~40% of sales
• EBITDA margins increased 478 bps YoY supported by a sharp
volume growth and a decline in employee expenses and other
expenses by 56 bps and 327 bps YoY, respectively
• A sharp growth in topline & EBITDA margin and debt free status of
the company helped net profit to grow ~46% YoY to ~| 36 crore
Leveraging on strong brand recall…
Symphony is India’s leading evaporative air cooler manufacturer with a
market share of more than 50% (value terms) in the organised product
category. Over the years, it has been able to create a strong brand name,
which has become synonymous with air coolers in India. With its focus
on R&D and innovations, Symphony constantly innovates in its products
to enhance design, technology and post sales services. The company has
launched more than one new model annually for six years. Over the
years, it has established a robust distribution network comprising ~750
dealers (152 in 2007), ~16,500 retail dealers (3,308 in 2007) and ~4,500
towns (1430 in 2007). Also, Symphony has consistently invested in brand
building through advertisement campaigns (~4% of sales over the last
three years), strengthening its brand recall.
Asset light business model with zero debt strengthens balance sheet
Symphony operates through an asset light model wherein it outsources
manufacturing of air coolers to about nine exclusive vendors in India and
uses the cash and carry model for sales. It has maintained its return ratios
i.e. RoCE and RoE at 44% and 38%, respectively, in FY14 mainly due to
an asset light model and almost debt-free status since 2006. We believe
the zero debt status provides adequate room to fund Symphony’s organic
and inorganic growth opportunities whenever required.
Exploring industrial cooling segment
Symphony is exploring new opportunities in the industrial cooling
segment through its Mexican subsidiary Impco. The company started
leveraging the enduring relationships established by Impco with large
format stores like Wal-Mart, Sears, Lowes, Famsa and Costco, among
others, to widen its presence in North, South and Central America.
Maintain BUY
Historically, during FY11-13, the stock commanded an average one year
forward earning multiple of 15x with revenue, earnings CAGR of 14%,
8%, respectively, and average RoE of 30%. We believe Symphony would
continuously post strong revenue, earning CAGR of 28%, 33%,
respectively, for FY14-17E. The company declared a total dividend of | 13
per share in FY14. As a policy, Symphony would keep the dividend
payout at more than 50%. Considering the continuous strong
performance of the company and expectations of strong return ratios,
going forward, we have revised our earning estimates upwards and value
the stock at 39x FY17E earnings (in line with Page Industries, another
consumption play) with a revised target price of | 2764 with BUY rating.

LINK
http://content.icicidirect.com/mailimages/IDirect_SymphonyLtd_Q2FY15.pdf