INFOEDGE INDIA LTD (Naukri.com) : BEST E-COMM STOCK TO OWN !!!

Scrip Code: 532777 / NAUKRI

CMP:  Rs. 809.05; Market Cap: Rs. 9,782.72 Cr; 52 Week High/Low: Rs. 938 / Rs. 688.10.

Total Shares: 12,09,16,159 shares; Promoters : 5,21,25,403 shares –43.10 %; Total Public holding : 6,87,90,756 shares – 56.89 %; Book Value: Rs. 137.54; Face Value: Rs. 10.00; EPS: Rs. 13.78; Dividend: 30.00 %; P/E: 58.85 times; Ind. P/E: 25.93; EV/EBITDA: 38.04.

Total Debt: Rs. 0.70 Cr; Enterprise Value: Rs. 9,747.81 Cr.

INFO EDGE INDIA LTD: Info Edge (India) Limited was incorporated in 1995 and is based in Noida, India. Info Edge (India) Limited is an India-based company engaged in the business of providing online classifieds and certain related services. The Company operates its business principally through four different divisions: Naukri.com, Jeevansathi.com and 99acres.com. It provides recruitment classifieds and services through its Naukri.com and Quadrangle business divisions. The company came out with an IPO on November 2006 offering 53,23,851 equity shares of Rs. 10 each for Rs. 320 per share raising Rs. 170.36 Cr, the shares of INFO EDGE got listed on 22 November 2006 at Rs. 623.80 per share. The company has given bonus shares in the ratio of 1:1 in the year 2010 and second bonus shares in the ratio of 1:1 in the year 2012. Info Edge (India) Limited provides recruitment classifieds and related services to job seekers and employers and recruitment consultants through its website: www.naukri.com, as well as through its office network. Through the Quadrangle division, the Company provides executive search services to its various corporate customers in the information technology and information technology-enabled services. Naukri.com is an online job posting website that offers services for recruiters, job seekers, and employers. Jeevansathi.com provides matrimonial classifieds and related services for prospective brides, grooms, and relatives. The Company also offers a real estate classifieds service through its Website: 99acres.com and an education portal Shiksha.com. Info Edge also owns Allcheckdeals.com, an online real estate brokerage firm which is run as a subsidiary company. Company also owns naukrigulf.com in Middle East. It also operates brijj.com, a professional networking site; firstnaukri.com, a fresher hiring site; quadrangle.com, an offline executive search business site; Meritnation.com that offers kindergarten to class 12 assignment and tuitions; and zomato.com, an online food guide portal. The company’s subsidiary as on 31 March 2016 includes: Naukri Internet Services Private Limited and Jeevansathi Internet Services Private Ltd both of which is own internet domain names and related trademarks used in it business, Allcheckdeals.com India Private Ltd, Applect Learning Systems Pvt Ltd which owns and operates meritnation.com, Zomato media Pvt Ltd , MakeSense Technologies Pvt Ltd and Info Edge (India) Mauritius Ltd. Info Edge India Ltd is locally compared with Infibeam, HOMESHOP 18, Justdial Ltd and Globally compared with Monster.com , Seek.com, carsales.com , Truila Inc, HomeAway Inc, Zillow Inc, SouFun Holdings, REA Group, Rightmove PLC, Yelp Inc of USA, Yahoo! Inc of USA, eBay Inc of USA, Googlr Inc of USA, Facebook Inc of USA, Linkedin Corp of USA, Pandora Media Inc of USA, Shutterstock Inc of USA, Sciquest Inc of USA, Zillow Inc od USA, Monster Worlwide Inc of USA, America OnLine from USA, Bazaarvoice Inc of USA, Xo Group Inc of USA, Twitter Inc of USA, Verisign Inc of USA, Yelp Inc of USA, Carsales.com Ltd of Australila, Moneysupermarket.com from UK, XING AG of Germany, United Internet AG of Germany, Opera Software ASA of Norway, Vistaprint N.V. of Netherlands, Baidu Inc of China, Beijing 58 Information and Technology Co Ltd of China, 21Vianet group Inc of China, iProperty Group Ltd of Malaysia, Nifty Corporation of Japan, Wix.com of Israel, Ateam inc of Japan, CROOZ Inc of Japan, F@N Communication Inc of Japan, Infomart Corp of Japan, Excite Japan Co Ltd of Japan, Asahi Net Inc of Japan, Nexyz Corporation of Japan, Drecom Co ltd of Japan, Zappallas Inc of Japan.

Investment Rationale:

InfoEdge (India) Ltd operates a wide range of online websites. It enjoys leadership position in recruitment website-Naukri.com, in property website-99acres.com and is among the top 3 players in matrimony website-Jeevansathi.com. Apart from this, InfoEdge has made significant strategic investments into emerging internet companies like meritnation.com, policybazaar.com, mydala.com, Canvera.com and zomato.com. The company employs over 2,460 people and operates through a network of 57 offices located in 32 cities throughout India. These offices primarily engage in sales, marketing and payment collection activities for company’s businesses. To cater to the Gulf market they have 2 offices in Dubai and 1 each in Bahrain, Riyadh and Abu Dhabi. Over the last few months Zomato has acquired four other companies, including MenuMania in New Zealand; Lunchtime in the Czech Republic; Obedovat in Slovakia; and Gastronauci in Poland and Urbanspoon. The Information Technology (IT) and information technology enabled services (ITeS) industry has been one of the key driving forces fuelling India's economic growth. India is among the world's youngest nations with a median age of 26 years. 65 % of Indian population is estimated to be below 35 years of age and India will have 7 Cr new entrants to its work force over the next 5 years. India currently has about 21.4 Cr internet users, the third largest in the world and is likely to have 33 Cr to 37 Cr internet users in 2015 which would then be the second largest in terms of incremental growth. Due to declining costs of Internet access and mobile devices, nearly 55 % of aggregate user base in 2015 is expected to have an access to the internet from a mobile or tablet device in India. Economic contribution from Internet in India can be potentially doubled from current 1.6 % of GDP to 2.8 % to 3.3 % by 2018. INFOEDGE is focused on investing in Naukri.com to raise product quality and maintain its dominance. Naukri is looking to enter new verticals and also improve its recruiter-jobseeker matching engine. The growth outlook is steady but the macro climate and growth rates need to improve for any material margin gains. Company will continue to invest in 99acres. The competition among real estate portals has reduced at the margin, but 99acres.com is expected to continue to invest in products and improve its share of new homes. Management believes that the real estate portals are an advertisement-led model and that new homes drive most of the real estate ad spends. INFOEDGE continues to maintain a war-chest of Rs. 570 Cr which is the cash on balance sheet to fend off competition if Quikr turns aggressive. Notably Quikr bought Commonfloor. 99acres will look to maintain traffic leadership and focus on expanding its share here to 60%+. Structurally, management expects real estate advertising spends to move online, as was the case in the jobs market. Zomato.com is focused on curbing its capital burn rate. It is introducing new products like table reservations and online ordering which will be rolled out in select markets, while at a broader level the focus will be on ad revenues and paid listings in its key markets of India and the UAE. Paid listings in key markets are in the teens and management intends to raise this to 25 %. This coupled with the addition of new cities for traditional restaurant discovery will be its key growth drivers. INFOEDGE’s Jeevansaathi.com portal is the number 3 player in India’s online matrimony market. The business has seen an uptick in volume growth led by new initiatives. Management believes that valuations of startups have cooled off and expectations have become reasonable. INFOE is therefore looking at new opportunities to deploy capital and its investment sweet spot is Rs. 6 Cr to 90 Cr for startups. During Q3, InfoEdge invested additional Rs. 15 crore in Canvera at a premoney company valuation of Rs. 75 crore resulting in an increase in its stake to 49 %. It also acquired 35 % stake in Rare Media, an early stage company looking to develop mobile-based applications for Rs. 7.4 crore taking the total amount invested in investee companies to Rs. 797 crore as of January 20, 2016. The current quarter also includes the profit of Rs. 34.2 crore resulting from transfer of its entire shareholding in Policybazaar to its wholly-owned subsidiary MakeSense for a consideration of Rs. 101.3 crore, the quarter also includes additional provision of Rs. 2.94 crore for bonus related to April 1, 2014 to March 31, 2015 pursuant to retrospective amendment to the "The Payment of Bonus Act, 1965" notified on January 1, 2016, and diminution in carrying value of investment amounting to Rs. 42.8 crore related to Canvera. The November 2015 Naukri Job Index reading was at 1,599, up 9 % YoY. IT-software index grew 18 % YoY to 2,175 while BPO-ITeS index grew 11 % to 1,460. Telecom witnessed maximum YoY growth 61 % while banking and financial services moderated at 2 % YoY. Pharma and biotech index declined 6 % YoY while oil & gas saw a decline of 34 % YoY to 759. It is expect that InfoEdge can deliver revenue CAGR of 19.7 % in FY15-17E, below its CAGR of 25.9 % in FY10-15 as growth moderates in other verticals like 99acres, Jeevansathi due to structural issues. It can show a revenue growth of 20 % For FY16E, led by a recovery in the Naukri business. It is believed that with the upturn in the economy, new product launches and client additions will spur growth. With market share of 65-70 %, the company can maintain margins in 50 % range. Info Edge had expected the Zomato business to break even at a top line of Rs. 40. Cr to Rs. 50 Cr. It is believed that Zomato will leverage its recent acquisitions to cross-sell products and establish a presence in new markets. Presently most of the revenues of the portal come from India and the UAE. In all Infoedge has good prospects looking forward and with the brand recall and diversified portfolio surely gives clear vision on company’s financial growth.   

Outlook and Valuation:

Info Edge (India) ltd is India’s one of the largest leading online company with its strong brands and sustainable growing businesses. It has a very excellent and experienced management team. The company have invested in several internet start-ups ventures. Info Edge’s Naukri has garnered higher market share in this slowdown, also its innovative products helps naukri to combat threat against Linkedin.com, naukri continues to invest in its brand, sales team, customer service, tech and product innovation and support. Info Edge’s 99acre.com is benefiting from the increase in the real estate advertising and has increased its market share. 99acres.com have improved its site by improving user experience- pricing trends, photos and videos, android Apps and the site is now have spread its sales coverage across cities, this has helped 99acres.com to bring in more traffic, 99acre.com soon plans to launch a verified listings. Info Edge’s Jeevansathi.com has leveraged its IP built over last 5 years through investing in brand building. Management will continue to invest its analytics and algorithms. Info Edge’s other brands like Shiksha, FirstNaukri, naukrigulf continues to perform well. Management is committed to invest in potential big businesses of future like zomato, meritnation, policybazaar and is vouching for potential start-ups and M&A’s. On financial side non-recruitment business grew 18 % YoY slower than average 24.3 % reported in FY15 to Rs. 44 crore and declined 4.1 %QoQ. Also, 99acres reported 12.7 % YoY growth to Rs. 25.9 crore in Q3 as real estate market continues to be weak amid sluggish sales. Paid transactions grew 23.4 % YoY and declined 3.7 % QoQ to 23,700 while paid listings grew 27.2 % YoY to 748,000. Jeevansathi grew 20 % YoY to Rs. 11.7 crore led by 36 % YoY growth in unique paid customers to 37,435 while pricing declined 13.5 % YoY and 9.4% QoQ to Rs. 3,182. As of Q3, outstanding profiles stood at 7.4 million compared to 6.6 million in Q3FY15 and 7.2 million as of Q2FY16. Shiksha revenues grew 41 % YoY to Rs. 6.4 crore. During Q3, InfoEdge invested additional Rs. 15 crore in Canvera at a premoney company valuation of Rs. 75 crore resulting in an increase in its stake to 49 %. It also acquired 35 % stake in Rare Media, an early stage company looking to develop mobile-based applications for Rs. 7.4 crore taking the total amount invested in investee companies to Rs. 797 crore as of January 20, 2016. Exceptional item during the current quarter includes. For Naukri the management attributed growth to a recovery in IT markets like Bengaluru which is growing at 20 % to 25 % while non-IT markets like Mumbai, Delhi grew 15 % to 20 %. Economic recovery bodes well for non-IT markets and could aid growth pick-up, and help sustain margins profile which is currently at 51.8 % as overall recruitment business starts growing in excess of 20 %. The management highlighted that Naukri corporate sales continue to see demand uptick while EBITDA margins at 58 % are near its all-time high of 62 %. For Naukri the overall hiring outlook continues to look good and is improving, led by IT while investee companies be volatile. Though the valuations appear rich, the shares are a play on economic recovery while Zomato and 99acres could be potential money spinners. Listing of its subsidiaries can also be supporting to the company’s valuation. On SOTP (sum-of-the-parts) basis, the value of INFO EDGE alone comes at Rs. 763.00 per share valueing 32 x its FY17E EPS of Rs. 23.90. The valuation of the Investee companis - the value of 99acers comes at Rs. 54 per share, Zomato Media valueing it at 50 % stake comes to Rs. 182 per share; Meritnation at 56 % stake at Rs. 18 per share; Policy Bazaar a 10 % stake at Rs. 10 per share and other investments at Rs. 30 per share totaling this gives us the value of its subsidiaries at Rs. 294 per share. And valuing the whole gives us the value of INFO EDGE of Rs. 1057.00 per share. At the current market price of Rs. 809.05, the stock is trading at a PE of 66.31 x FY16E and 46.76 x FY17E respectively. The company can post Earnings per share (EPS) of Rs. 12.20 in FY16E and Rs. 17.30 in FY17E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.   

SOTP VALUATIONS :

Business Subsidiary	Value Per Share (₹)
InfoEdge Standalone	763.00
99acres (Non-Listed)	54.00
Zomato (Non-Listed) 50 % stake	182.00
Meritnation (Non-Listed) 56 % stake	18.00
Policy Bazaar (Non-Listed) 10 % stake	10.00
Other Investments	30.00
TOTAL	1057.00

KEY FINANCIALS	FY15	FY16E	FY17E	FY18E
SALES (₹ Crs)	611.50	724.50	871.70	1,054.40
NET PROFIT (₹ Cr)	194.10	148.00	210.00	308.60
EPS (₹)	16.50	12.20	17.30	25.40
PE (x)	47.40	64.30	45.30	30.80
P/BV (x)	5.70	5.30	4.90	4.30
EV/EBITDA (x)	50.70	59.80	33.90	24.30
ROE (%)	16.00	8.60	11.30	14.80
ROCE (%)	9.80	5.50	8.90	11.10

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*As the author of this blog I disclose that I do not hold  INFOEDGE LTD in my any of the portfolios.

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Disclaimer: 

This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.   

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SYMPHONY LTD: COOL PRODUCT, HOT STOCK !!!

Scrip Code: 517385 / SYMPHONY

CMP:  Rs. 2,421.45; Market Cap: Rs. 8,469.86 Cr; 52 Week High/Low: Rs. 3,275 / Rs. 1,650.00.

Total Shares: 3,49,78,500 shares; Promoters : 2,62,33,870 shares – 75 %; Total Public holding : 87,44,630 shares – 25.00 %; Book Value: Rs. 82.96; Face Value: Rs. 2.00; EPS: Rs. 38.67; Dividend: 700.00 %; P/E: 62.61 times; Ind. P/E: 50.83; EV/EBITDA: 44.60.

Total Debt: ZERO Cr; Enterprise Value: Rs. 8,465.13 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.

Investment Rationale:  

Symphony Limited Established in 1988, is a world leader in evaporative air coolers, Symphony focuses on innovative design to create better and eco-friendly products for domestic and industrial customers in 60 countries across the globe. Symphony’s design-driven innovation and green engineering is a sustainable competitive advantage. Company delivers market-leading products with engineering and design innovation, improved energy conservation, distinctive styling and customer-centric design. Symphony leverages a unique and successful asset light business model for its residential coolers in India and in-house lean manufacturing for its industrial coolers in Mexico to achieve sustainable and profitable growth. Symphony is a global company committed to develop sustainable and responsible products which means leading the air-cooling industry's efforts to develop breakthrough green technologies to combat climate change. Symphony is present in key retailers like Wal-Mart, Lowes, Carrefour, Singer, Sears, Costco, Home Depot etc. Symphony provides domestic (plastic), commercial (heavy duty metal coolers) and industrial (metal cooler-machine made modular unit) air coolers across various models. Employing an environment-friendly carbon reduction product strategy, Symphony air coolers offer a superior value proposition to air conditioners. With increased global warming and environmental degradation, people around the world recognise that businesses must act responsibly and offer green products to customers. Symphony enables people across the world to capitalise on eco-friendly, energy-saving air cooling technologies as a serious alternative to harmful and inefficient air-conditioners. Symphony believes an environment-friendly approach transcends commercial considerations and a cleaner environment is the best legacy one can leave behind for future generations. Symphony’s power-saving Technology is currently the only air cooling technology in the market that complies with international standards for product energy efficiency. Air coolers represent a low-cost, energy-efficient and an environmentally-friendly alternative to air conditioners. Air coolers are simple to use and cools air through the evaporation of water. Evaporative cooling differs from typical air conditioning systems which use vapour-compression or absorption refrigeration cycles. Evaporative cooling works by employing water’s large enthalpy of vaporization. The temperature of dry air can be dropped significantly through the phase transition of liquid water to water vapor (evaporation), which can cool air using much less energy than refrigeration. In extremely dry climates, evaporative cooling of air has the added benefit of conditioning the air with more moisture for the comfort of building occupants. They also filter dust and dirt without drying the air. Unlike conventional air conditioners, evaporative coolers require fresh air and work best with open windows and doors. They are best suited for residences, showrooms, shops, offices, especially where doors are opened and closed frequently which is major advantage over conventional air conditioners. Besides, they consume significantly less electricity and produce no emissions. Symphony offers a wider range of air coolers, which find applications also where it is difficult or impossible to install and use an air conditioner. Symphony’s air coolers are easy-to install, relatively inexpensive, and can be easily maintained by a layperson. The domestic air cooler segment is largely fragmented with about 70 % to 80 % of sales accounted for by unorganised players. The branded air cooler industry is competitive in nature with the top four players accounting for more than 90 % of the branded air cooler market. Symphony is the leading player in the space followed by Kenstar (Videocon Industries Limited). Other players include Bajaj Electricals, Khaitan, Maharaja and Usha. Symphony is India’s leading evaporative air cooler manufacturer with a market share of 55 % in 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 innovation, Symphony constantly innovates in its products to enhance design, technology and post sales services. It has launched more than one new model annually for six years. Over the years, it has established a robust distribution network comprising 750 dealers, 16,500 retail dealers and 4,500 dealers in towns. Also, Symphony has consistently invested in brand building through advertisement campaigns. It spends around 4% of its sales over the last three years and 6 % in FY16 in advertisement for strengthening brand recall. Further, the company plans to grow its network to 40,000 dealers over the medium-term for deeper penetration and a stronger presence in rural and semi-urban markets. In spite of a bleak macro environment, Symphony clocked overall volume CAGR of 13 % during FY11-15 supported by strong demand from domestic markets led by launch of new models during the same period. Company introduced six new models of ‘i’ series air coolers, the intelligent coolers with features such as empty tank alarm, full Remote function, memory restore function, dura pump technology, etc. With increase in spending in rural areas & with increasing demand from overseas countries would help to drive Symphony’s overall volume at a CAGR of 18 % during FY15-18E. 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. Symphony, together with its subsidiaries, offers 87 models of air coolers for almost all categories of customers. Outsourcing products to nine different vendors and not sharing intellectual rights creates a strong entry barrier for other players, providing an economic moat. Also, it helps Symphony 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 of 35 %, RoE at 39 %, giving last three year’s average of 39 %, 34% mainly due to an asset light model and almost debt-free status since 2006. The zero debt status provides adequate room to fund Symphony’s organic and inorganic growth opportunities whenever required. Symphony operates on a cash and carry model with almost 95 % of domestic sales on advance payment 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. The receivable days last three year’s average is 45 days on the books of the company & are only a reflection of 5 % of the domestic market and 40 % in international markets where Symphony has to provide some levy on receivables due to bulk orders. The cash & carry model and higher supplier days help the company to maintain lower working capital requirements throughout the season. The company recently acquired Mexico based Impco SDERL DE CV (Impco). Currently, Impco contributes 18 % to the consolidated topline with a major chunk of revenues which is 65 % of overall sales coming from centralised and heavy duty air coolers and the remaining 35 % of sales from room coolers. Currently, Impco serves markets like the US, India, Iraq and some of the Middle East countries. Symphony started leveraging the enduring relationships established by Impco with large format stores like Wal-Mart, Sears, Home Depot, Lowes, Famsa and Costco, among others, to widen its presence in North, South and Central America. Besides, Symphony’s acquisition has created a new opportunity in the category of heavy duty air coolers for outdoor applications and industrial coolers, a project-oriented, non-seasonal business segment. The company was the first in India’s organised sector to launch industrial air coolers and establish a presence in a number of business spaces, viz. food & beverages and religious establishments, among others. Symphony has completed 109 installations. The company has executed orders for some renowned brands namely Asian Paints, DHL, Dixon Technologies, Swaminarayan Temple, Iskcon Temple, Marico, Tractor India and Shivam Auto Tech (part of Hero Group). Symphony received its first order from Indian Railways to install air coolers in waiting rooms of Kota and Godhra railway stations. Plans to improve operational efficiency at Impco to have a capital light and asset light business model same in line with Symphony’s Indian operation. Impco can focus more on sales & marketing, business development, research & development, product innovation, etc. to improve operational performance and provide flexibility in operations. As a result, by monetising surplus assets to become even internal debt free company by paying off the parent company loans (Symphony’s) and also further improving the profitability by savings of interest, depreciation, forex fluctuation and other overheads Entry into Chinese market through acquisition Symphony acquired a 100 % stake in China-based air cooling company MKE for the consideration of a meagre Rs. 1.55 crore. During FY15, MKE recorded sales of Rs. 50 crore while it recorded loss at bottom-line of Rs. 9 to Rs. 10 Crore. The acquisition will facilitate Symphony’s access into China which is second largest air cooler market after India and other international market. The acquisition will also provide Symphony the benefit of sourcing of raw materials for its OEMs. MKE also has a strong R&D and test centre, which meets the quality standards of the US and Australia. Symphony aims to improve its sales to the level it clocked during its peak of Rs. 130 crore and turn around its business following various strategic moves. Raising demand, rural consumption increase and diversifying in emerging markets makes prospects of Symphony much bright & regular cash flow in coming future.  

Outlook and Valuation:

Symphony Limited has established itself as a world leader in evaporative air coolers. Symphony is globally popular because of the sensitivity to good design which is a universal phenomenon. In its history of more than two decades, Symphony has gone through various stages of development. The company was a pioneer in introducing cooler as a lifestyle product for the first time in India and launched plastic body coolers compared to the then available metal coolers and was a market leader in the air cooling market. Symphony’s products are designed to give very high air delivery at very low power consumption. Symphony Limited has a market share of more than 50 % in Indian cooler segment. India’s air cooler market is growing at 20 % p.a. with the organised segment growing faster at 25 %, given low penetration levels of 5 % for the air cooler segment and a consumer shift away from the unorganised market. Symphony Limited is a clear leader in the air cooler market with 50 % share in the organised segment and which is 30 % of the Rs 2,000 Cr air cooler market (organised + unorganised). Currently, the air cooler industry is largely dominated by the unorganised segment 80 % volume market share. There can be a shift from the unbranded to branded category due to rising aspiration level provides huge potential for organised players. Hence, organized industry is likely to grow at 25 % CAGR in FY15-25E. Symphony being the market leader is expected to benefit the most from this structural shift in the long run. Symphony will record 24 % volume CAGR in FY15-25E. Further, as a policy, Symphony would keep the dividend payout at more than 50%. This would increase its return ratios, going forward. On April 12, 2016, the honourable district court, Gandhinagar, Gujarat granted a stay order in favour of Symphony against Wim Plast Ltd, which has launched "Cello" Air Cooler models in India namely "Marvel",'Wave' and 'Tower' which were smiliar to registered designs of Symphony Ltd models 'Winter', 'Sumo' and 'Diet'. Symphony pointed out to the Court that Wim Plast's 'Marvel' model is identical and copy to Symphony's 'Winter' model, Wim Plasts 'Wave' model is copy to Symphony's 'Sumo' model and another 'Tower' model is copy to Sympony's 'Diet' model. The district Court of Gandhinagar Gujarat order stated that by way of ad-interim injunction, the Cello (Wim Plast) are restrained by an order of temporary injunction from manufacturing, marketing, advertising and publishing, selling the products which is having identical and deceptively similar design as of design of Symphony's models Winter, Sumo & Diet. Symphony will continue to take recourse to every legal option available to it to stop Wim Plast and such other imitators from launching, air cooler models in India which are copy-cats of Symphony's range of air coolers. Symphony's management is clear that they will leave no stone unturned to defend its Intellectual properties and will take all necessary legal action against all individuals and/or companies that infringe upon them. Symphony reported its highest quarterly revenues of Rs. 160 Cr which was 20 % YoY growth during 2QFY16. The domestic revenues grew by 20 % YoY to Rs. 150 Cr while the exports reported 13 % YoY growth at Rs. 12.80 Cr. The focus on incremental dealer enrolments coupled with its dominant positioning in the air- cooler segment has undoubtedly helped Symphony push the primary sales to record levels. The company can report similar growth during 3QFY16. In the international business, Symphony has initiated measures to convert the IMPCO business to an asset-light model by outsourcing its manufacturing processes. It also concluded the acquisition of Munter Keruilai. The China acquistion, which is now, became 100 % wholly-owned subsidiary effective 1 Jan 2016. The EBITDA grew by 24.8 % YoY with margins improving 15.5 % YoY to 37 %. Margin expansion was led by 3.40 % YoY gains in gross margin to 53.9 %, offset by an increase in employee/other expense (as % of net sales) by 0.80 % to 1.00 % YoY to 5.8 %/11 %. Adj. PAT grew 32.5 % YoY to Rs. 47.7 Cr aided by other income growth of 78 % to Rs 7.4 Cr and a 1.95 % drop in tax rate to 28.3 %. Management maintained its mid-to-long term earnings guidance of 20-25 % CAGR. Symphony can deliver strong earnings growth at a 34 % CAGR over FY15-FY18. At the current market price of Rs. 2,421.45, the stock is trading at a PE of 59.36 x FY16E and 54.11 x FY17E respectively. The company can post Earnings per share (EPS) of Rs. 40.79 in FY16E and Rs. 44.72 in FY17E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.   

KEY FINANCIALS	FY15	FY16E	FY17E	FY18E
SALES (₹ Crs)	545.66	586.03	641.12	818.10
NET PROFIT (₹ Cr)	164.44	198.88	218.27	261.10
EPS (₹)	33.28	40.79	44.72	74.60
PE (x)	74.97	61.18	55.79	29.30
P/BV (x)	30.08	24.18	19.42	11.50
EV/EBITDA (x)	52.37	43.10	38.92	23.20
ROE (%)	40.12	39.52	34.81	38.40
ROCE (%)	57.40	55.86	49.47	47.40

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase. (Why Strict stop loss of 8 % ?) -  Click Here

*As the author of this blog I disclose that I do not hold  SYMPHONY LTD in my any of the portfolios.

*Reader Friends, grab a fresh hot cup of coffee, turn on your net & browse on to www.bhavikkshah.blogspot.in & take out few minutes to get to know the most interesting world of investment... Till then HAPPY INVESTING, don't forget to Share !!

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..

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Disclaimer: 

This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.  

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It's my Birthday Today :)

Hello Friends!! 

 It’s my Birthday today .. J J …and am too, little bit of happy & excited like everyone else on Birthday’sJ, no matter how old are you, you too have that pleasant feeling about the year coming ahead, we are happy that we have passed off one year, and optimistic for the coming one. Last year of mine was a mix but  the year gone by left many joys and memories. I always write something for all you my dear reader friends on this day, as this is a day when I speak my mind and heart out.

The year gone by was beautiful; off course on market front, it cannot be said so, but would also say it was not bad either, at least for me and my stocks, yeah we were not in green but did well by benchmark’s performance and this does not discourages me to be invested. I always advocate stock market investing. I truly believe that India has huge potential and is definitely a long term story driven on consumption demand and is better positioned to enjoy demographic dividends. Indian economy is of Rs. 105 lakh crores ($ 1.59 trillion) with our stock market capitalisation of Rs. 94.71 lakh crores (as on 1 April 2016), with registered investors of 3.07 Cr (2.45 % of our total population). Whereas, US has market capitalizing is of $ 19.8 trillion which is also the biggest representing 52 % of the world’s market cap. US has population of roughly about 31.90 Cr and investing population in stock markets are whopping 14.35 Cr or I should say 45 %, and we at mere 2.5 %. India has savings rate of 36 % and still only 7 % of it comes to the equity market. Indian Retail investors hold around $ 16 billion of Indian equity. These figues says a lot and we should understand the potential of our strength, encourage investing in equities and should not shy away from stock markets, terming it as “Gamble”. 

Indian corporates have tremendous positive earning potential, & there are vast numbers of businesses of various kinds available at better price. What we misunderstand is that we buy at wrong price and most often we buy on tips, and there’s where we fall off. I truly believe that “Valuations are the slave of Earnings”, if you trap the earnings right you get the valuation right, off course with sentiments the stocks do falls back, but at the end the valuations do prevails. Look at the stocks with net profit margins above the fixed maturity instruments, with minimum debt and high ROE & ROCE’s. Now, there are many who would say we don’t understand these terms or we dont have much time to spare to, for them I would say go for mutual funds- let the expert fund managers do the job for you, but do invest, be the part of new vibrant India. Built up your retirement fund, start investing in mutual funds in Systematic manner via SIP (systematic investment plan). Take a minimum investment goal for five years at least, start investing little bit every month and you shall surely win, and those who are enterprising enough should look out for stocks with high net profit margins, low debt, high ROE & ROCE’s and off course strong Cash Flows. In all do invest and study well before investing. There’s lots of opportunity out there and participate in the growing economy of ours.

I am optimistic about markets and beileve that more positives are yet to come. Be positive and Be invested. Lastly I would like to thank all you wonderful people, who have become impairable part of my life now, who have constantly encouraged me and inspired me in all aspects of my life.

Again, I take this opportunity to give Thanks to all my reader friends for being there for me, and encouraging me...

                                           God Bless You All !!!

Thanks to my parents who made me what I am here today And Thanks God for all of it !!!

Warm Regards,

Bhavikk Shah.  

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