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.
Investment Rationale:
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.
KEY FINANCIALS | FY13 | FY14E | FY15E | FY16E |
---|---|---|---|---|
SALES (₹ Crs) | 377.80 | 488.10 | 607.50 | 730.10 |
NET PROFIT (₹ Cr) | 60.10 | 88.20 | 115.80 | 140.00 |
EPS (₹) | 17.20 | 25.20 | 33.10 | 40.00 |
PE (x) | 49.00 | 33.40 | 25.40 | 21.00 |
P/BV (x) | 13.30 | 10.90 | 8.70 | 7.20 |
EV/EBITDA (x) | 36.80 | 25.50 | 19.40 | 16.00 |
ROE (%) | 27.10 | 32.70 | 34.40 | 34.00 |
ROCE (%) | 33.70 | 40.60 | 42.90 | 42.30 |
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