|SALES (₹ Crs)||377.80||488.10||607.50||730.10|
|NET PROFIT (₹ Cr)||60.10||88.20||115.80||140.00|
Tuesday, May 13, 2014
SYMPHONY LIMITED : COMMANDING BEST FUNDAMENTALS !!!
CMP: Rs. 841.00; Accumulate at every dips.
Short Tem Target: Rs. 883.00; Medium to Long Term Target: Rs. 925.00; STOP LOSS – Rs. 773.75; Market Cap: Rs. 2,941.69 Cr; 52 Week High/Low: Rs. 878.40 / Rs. 263.15.
Total Shares: 3,49,78,500 shares; Promoters : 2,62,33,870 shares –75.00 %; Total Public holding : 87,44,630 shares –25.00 %; Book Value: Rs. 53.48; Face Value: Rs. 2.00; EPS: Rs. 26.31; Dividend: 325.00 %; P/E: 31.96 times; Ind. P/E: 28.06; EV/EBITDA: 30.62.
Total Debt: ZERO Cr; Enterprise Value: Rs. 2,935.80 Cr.
SYMPHONY LIMITED: Symphony Limited was founded in 1988 and is headquartered in Ahmedabad, India. The company was formerly known as Sanskrut Comfort Systems Pvt Ltd and changed to Symphony Comfort Systems Ltd in 1995 and it again changed its name to Symphony Limited in 2010. The company came out with an IPO on February 1994 with a premium of Rs. 35 per share and announced splits of its face value from Rs. 10 to Rs. 2 per share in February 2012. The company engages in manufacturing of consumer durables under the brand name “Symphony”. Symphony Limited manufactures and sells consumer durable products in India. The company offers domestic, commercial, and industrial air coolers. It provides desert, tower, room, and personal coolers for residences, shops, showrooms, and offices and various industrial coolers for factories, offices, schools, malls, assembly halls, warehouses, and metro stations. The company also exports its products to approximately 60 countries. Its products are already being sold in U.S.A, Europe, Middle East, Africa, and South–East Asia & shortly will be available in many other countries. It offers its products through a network of distributors and dealers. Symphony coolers have plastic bodies unlike conventional metallic air coolers manufactured by the unorganised sector, are UV Cooling pads which combine cooling effects with elegant looks. The company has wide range of products which includes Evaporative Air Coolers, Air Conditioners and Water Heaters. The company offers products under Evaporative Air Coolers are Desert Coolers, Room Coolers and Personal Coolers. The products offered in Air Conditioners are Window Air Conditioners and Split Air Conditioners. The product offered under Water heaters is only Sauna Heaters. Symphony Limited subsidiaries include Symphony Air Coolers Inc, USA. Symphony Limited is locally compared with Bajaj Electricals Ltd, Havells India Ltd, Khaitan India Ltd and globally compared with Daikin Industries Ltd of Japan, Gree Electric Appliances Inc of China, Lennox International Inc. of USA, Tabreed alias National Central Cooling Company PJSC of UAE, Aaon Inc. of USA, Johnson Controls Inc. of Wisconsin USA, Denso Corporation of Japan, Ingersoll-Rand Plc of Ireland, Dover Corporation of Illinois, Mitsubishi Electric of Japan.
Outlook and Valuation:
Symphony Limited is a India’s largest selling Air Cooler Company with a market of more than 50 % in Indian cooler segment. 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. However, the company retains the rights for product development, design and marketing function to maintain the exclusivity of products and technologies of Symphony from its vendors. The company pays on a cost plus fixed margins basis to its contract manufacturers who have a cumulative capacity of 1o lakh units. Its own Surat SEZ is used for exports and has a capacity of 200,000 units. Symphony together with its subsidiaries offers 87 models of air coolers for almost all categories of customers. Outsourcing of products to nine different vendors and not sharing intellectual rights creates a strong entry barrier for other players creating a deep Economic Moat. Also, it helps the company to concentrate on its core competence i.e. “innovation” in product development and feature evaluation. The company has maintained its return ratios i.e. RoCE at 39 % and RoE at 33 % in FY13. Symphony’s last three year’s RoCe average comes at 42 % and three year’s RoE comes at 34 % mainly due to an asset light model and almost debt-free status since 2007. This Zero Debt status provides adequate room to fund Symphony’s organic and inorganic growth opportunities whenever required. Symphony’s second strongest point is its business model. Symphony operates on a cash and carry model with almost 95 % of domestic sales coming as advance payments as per the terms with dealers and distributors with the remaining i.e. 5 % through large format stores. In the international business, about 40 % is through large format stores while 60 % is through dealers and distributors. Trade through dealers and distributors (domestic and international) happens with zero credit. This cash and carry model and higher supplier days help the company to maintain its lower working capital requirements throughout the season. On Financial side, Symphony recorded 33 % YoY growth in standalone revenue to Rs. 113.3 crore largely supported by 33.5 % YoY volume growth in Q3FY14. Domestic sales volumes increased by 25 % YoY driven by strong demand of window and diet range of coolers. Export sales volumes increased 65.5 % YoY led by good demand from South African and Latin American countries. For the industrial segment, the company has added new clients such as Havells, Pepsi, Yamaha, etc. Company’s EBITDA margin increased by 3.00 % YoY to 29.6 %. This was due to a dip in selling & marketing expenses and other expenses. An expansion in margin and lower tax outgo (onetime benefit) led to a sharp growth in PAT by 50 % YoY to Rs. 27 crore. The company has continuously recorded a stellar performance in the last 11 quarters with sharp volume growth. Historically, during FY11-13, the stock has commanded average one year forward PE multiple of 15 x with revenue, earning CAGR of 14 %, 8 %, respectively, and average RoE of 30%. With the strong performance during 9MFY14, the company could post strong revenue CAGR of 25 % and profit CAGR of 33 %, led by strong volume growth of 24 % for FY13-16E. At the current market price of Rs. 841.00, the stock is currently trading at all time high PE of 25.40 x FY15E and 21.02 x FY16E EPS respectively. The company can post Earnings per share (EPS) of Rs. 33.10 in FY15E and Rs. 40.00 in FY16E. One can buy SYMPHONY LIMITED with a target price of Rs. 925.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 883.00.
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