SYMPHONY - A Comfort to hold for Long term?


(Ankit Gupta) #161

Ashwini,

The point I was trying to make was that they can increase their dividend payout more than 50% since they have 200 crore of cash and most of their profit generates equivalent cash coz of their business model.


(Ashwini Damani) #162

Give more than 50% back to investors, and, then be without cash - take money from banks. I am not sure if any company gives more than 50% of profits as dividend.

Dont think you assumption is valid at all. You need deep pockets to match competitive forces.


(Ankit Gupta) #163

Ashwini,

They already have cash of Rs.200 crore and I dont think they would go for an unreasonably high priced acquisition (IMPCO was bought at a very cheap price). They generate healthy free cash flows. Their business model is asset light and they work on negative working capital. They wouldn’t need debt to run their business. Look at Hawkins (consumer business) which has dividend payout ratio of more than 70%. A recent example of a company throwing out high dividend would be MPS.


(Rakesh Chandak) #164

Accelya kale last year had dividend payout of more than 100%. Likely to be closer to 100% even going forward.


(Kunal) #165

Dividend Payout should be moderate. In case of Accelya and Symphony majority of dividend goes to Promoters /Parent group pockets.

I have read some portion of Symphony AR. Their words are extremely positives towards future growth.

If that is the case then why use cash for mainly Dividend instead of growth?

Why not spend enough for right Acquisitions, geography expansion plan ?

Kunal


(Utkarsh Patel) #166

I agree with Ankit

The business is not capital intensive even if one goes for acquisition, expansion can be accomplished through internal accruals as the business is expected to keep throwing out cash.Current buffer of 200 cr is more than enough to satisfy funding, should the need arise. I expect to have higher dividend payout (maybe I’m being greedy) in future as building on reserve would unnecessary dilute the overall returns from the business.

But modelling to maximize financial returns and actually doing business within constraints are quite different. Management may feel more secured with reserves, and I’m willing to partner them as a shareholder in that case.

Disclosure: Invested


(Kunal) #167

“A manufacturing facility would be set up at Kandla SEZ at an investment of less than Rs 1 crore. It would be operational in the coming two months,” said Achal Bakeri.

Symphony isreplicatingits success of asset light model further. I am watching sales growth from it.

Kunal

Disc : Core and bought in recent dip.


(Piyush) #168

Symphony reported strong 51% year-on-year (yoy) jump in net profit at Rs 21.63 crore for the quarter ended September 2014 (Q2), on back of healthy revenue growth. The company had registered a net profit of Rs 14.32 crore during the same quarter year ago.

Net sales of the company for the quarter grew 43% to Rs 103 crore against Rs 72 crore in the corresponding quarter of previous fiscal.

EBITDA or operating profit margins improved by 300 basis points to 28.5% from 25.4%.

Disc: Invested for long term.


(Utkarsh Patel) #169

Concall Updates

Q1FY15

Q1FY14

Q4FY14

YoY growth %

Op Sales Value (cr)

102.71

72.08

150.63

42.5

Sales Volume (lacs)

1.64

1.19

2.13

37.9

Average realisation

6183

6035

6927

2.45

Gross Margin (%)

53.95

53.38

60.96

-

EBITDA %

28.5

25.4

30.1

-

PAT %

19.6

18.3

21.4

-

Particulars

Value(Q1FY15)

Value (Q1FY14)

Value (Q4 FY14)

% contri FY14

Sales - India

95.64

66.94

131.04

76.9

PBIT Margins â India %

30.35

27.05

28.46

-

Sales â ROW

7.07

5.14

19.59

23.1

PBIT Margins â ROW %

25.74

28.21

42.9

-

* 40% North India, 25% West india = geographical presence

* RoW excluding India and China size is 7 M volume market. Currently Symphony forms a very small part

* Introduced 2 new models in the quarter which have received good response & in line with companyâs profitability

* Current household penetration 3% AC, 9% air coolers, 35% nothing, 45% fans

* Broke seasonality at distributor level as well as dealer level. Almost 2000 dealers bought in Q1FY15 season

* NO focus on centralised air cooling exports. Just concentrating on domestic market for centralised air cooling

* Extended summer provided a bit favourable tailwind due to retail customers. Large service calls even in this season showing increased usage

* Vietnam, Philippines, Singapore and Brazil â new opportunity markets, started dealer discussions

* Single largest export order of plastic residential cooler 1 M$ from Africa- most of which will be in Q2FY15. International order inquiry high. Expect good orders in the future

* Nepal â Symphony coolers becoming popular

* Centralised air cooling market- Good inquiry and strengthening further

* Witnessing good demand across segments, December quarter also likely to show strong growth. Long term guidance of 20-25% growth remains with improved profitability

* IMPCO = Modest growth expected on standalone basis, IMPCO is responsible to North America and centralised cooling. Some areas identified for improving efficiency

* Dividend policy > 50% payout minimum. Open to inorganic opportunities only in air cooling. Sufficient funds have been kept for possible acquisition

* Capital employed in Home appliances is high due to advances received which is classified as capital employed according to Accounting standards

* Last year spent 21 cr in FY14, this year likely to be higher

* Kandla SEZ not owned, lease facility. Other assembly line facility investment worth 20-30 lacs. Will be operationalized in 2-4 months

* Suratâs Sachin SEZ capex was 3.5 cr, was recouped through tax saving in a year. Current utilization here at 60-70%

* Corporate office Capex is around 4-5 cr

* Exports are more profitable at PAT level (similar at EBITDA levels) due to lower taxation at SEZ


(Prashant Kulkarni) #170

Symphony Results:http://www.moneycontrol.com/livefeed_pdf/Jan2015/SYMPHONY_31dec2014_S.pdf


(Augustine Jos) #171

(Ravi) #172

Symphony Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on April 21, 2015, to consider a proposal for an international synergistic acquisition.

Source: BSE website

Thanks,

Ravi.S

Disc: Invested


(Nikhil gupta) #173

Despite a good set of results, the stock has tanked over the last week by more than 40% in 5 days. Since Symphonyis among my core holdings, needless to say it has been quite a painful last few days.

I know that many boarders hold Symphony in their portfolios, and was wondering how are they treating this?


(Ravi) #174

Hi Nikhil,

The day after I posted the above message(dated 20th Apr), I found Symphony trading at 3175. At 90 P/E I felt this stock was super-expensive. I just booked out my profits.

I re-entered today at 2100. I could have been simply lucky.

A volatile Stock: But, looking at the stock’s graph, this is not a HDFC bank kind of a stock, with low volatility. This is a highly volatile stock, and such wild movements are expected. There has been multiple instances, where the stock has corrected 30-40% like this and has bounced back. (for e.g. the first time it touched Rs 320 levels(26 apr '11) it fell back to Rs. 200 levels, only to rise back. This was not a one off instance.)

At CMP of 2000 it is trading at a P/E of ~ 54 (assuming Rs 39 as EPS for FY15(ending june)).

Even assuming a modest 25% growth in EPS, at 43P/E(Rs 48.75 based on FY16), the MoS is slightly higher at this level.

The biggest lesson from this stock to me was “Use volatility to your advantage”.

Thanks,

Ravi S

Disc: Invested at a lower Avg. cost price


(Nikhil gupta) #175

Hi Ravi,

I think the scale of the decline has caught me a bit blind sighted. To your point about stock hitting a high of 3175 and PE of 94. The run up in valuation has also been a consistent rise from 20 TTM PE to 76 TTM PE, since 2013 end.Symphony kept breaking my thresholds of good/fair PE ranges and I always knew that Symphony was expensive. But then till the time the company was delivering solid growth, I did not see a reason to exit. This time, however, despite the good results, the stock just tanked.

The experience has stressed on me the importance of having an exit strategy in place for all stocks, and the importance of booking continuous profits.However,the exact mechanicsof it still is elusive to me.

Nikhil


#176

Symphony is attractively priced now. For a stock which is growing @ 30% m the present price discounts only 2 years growth.


(manish dwivedi) #177

Symphony has been sliding continuously for last few week. I have a firm belief in the story but such a steep fall is shaking the very foundation of my belief. Is there something more here than what meets the eyes?


(vivek naik) #178

symphony has issued a profit warning for the june qrt as a result of erratic weather conditions across the country.their june qrt will not be upto expectations pl check symphony under moneycontrol


(Ravi) #179

@manishkdwivedi: If it is not a 30% growth story, based on management’s own admission, with better price realisations they should still do reasonably well this quarter. I see it as a systemic risk rather than Symphony specific risk. This year summer was erratic and all the companies in this segment expect tepid numbers. But it is known fact that, there are a lot of unorganized players in this Industry. Weaker hands should find it tough and an organized player like Symphony should gain market share. Lets see.

My views may be biased as I am invested into this. Please correct me.

Thanks,
Ravi S
Disc: Invested ~5% of my pf. My views may be biased. Please do your due diligence.


(Nikhil gupta) #180

My worry with the growth drop is the compression in P/E multiple, along with the decline in the earnings. Symphony has enjoyed a high P/E over the last year and a half because of secular (and also less seasonal) growth expectations. Once the growth expectation takes a beating because of seasonal factors, the markets may not be willing to give it the same stratospheric p/e.

thanks

Disc: Invested with more than 5% pf.