The Ahmedabad-based company, which became a household name among the middle-class consumers who could not afford an air conditioner, feels_ in another one decade, the industrial air cooling would be its largest revenue grosser._
With a revenue of Rs 390 crore in FY-13, Symphony hopes to cross the Rs 1,000-crore mark by FY16.
The company seems to be very aggressive indeed!!!
Disc: Invested in this stock
1000 crores in fy 16 and if u consider even NPM of 15% we are talking of net profits of 150 crores …thats a net profit growth of three times in three years… No wonder the stock looks so strong with buying emerging on every decline.
The only sore point for me is if they end up buying some dud company in the hope of achieving revenue targets. Consoling point is that promoters have high stake and therefore will be careful of what and at what price they buy when they buy.
Hitesh,
The timing and the acquisition price of impco was excellent. Hope they follow the same diligence here.
The company seems to be moving on the growth path and the visibility of 25%+ growth is there. The industrial segment too is doing good. Its a great semi-urban and rural India play.
This corporate presentation is worth a readhttp://www.symphonylimited.com/pdf/corporate-presentation.pdf
Back of the envelope calculations
The company has already clocked Net Profit of 40 Crores of Net Profit in 6 months till date , and given the growth path looks all set to touch 85-90 Crores for Full year (especially considering that industrial segment is going great guns and Mar qtr is the best qtr)
Even if we safely assume 85 crores of profit, we have a PE mutliple of ~17.5 for a Debt Free Company with superb growth prospects and commendable management (Refer this articlehttp://www.symphonylimited.com/pdf/Forbes%20India_Symphony_170812.pdf)
My personal view is a normalised PE of 20 times, which gives a value of close to 1700 Crores. Thats a decent upside of 20%
I would expect even a higher upside, based on probable non-linear growth based on international growth in industrial cooling such as in Latin America.
For example , the latin american subsidiary of Symphony Limited, has successfully executed and recently commissioned a pilotproject of central air-cooling in first of several locations of the Dutch owned’Makro’ chain of super-markets in Colombia, south America.
This is a June End company. Only Q1 results out till now.
I know…its due to my habit of Mar-Apr comparision (due to years of being in financial reporting), that I like to compare everything on that basis. Helps me. However I should have been careful for sake of others. My Bad.
Air cooler company Symphony Ltdas subsidiary Impco S.De. RL.De. CV, Mexico has executed and commissioned a pilot project of central air-cooling, the first of several locations of the Dutch-owned aMakroa chain of super markets in Colombia, South America. Further, the company is also in talks with the retail chain to air cool its other super markets.
There seems to be good traction coming from south american countries for industrial cooling.
http://www.fnbnews.com/article/detnews.asp?articleid=34674§ionid=1
Symphony presentation (link provided by ashwini damani) is very interesting.
Some points coming out of it are:
There is a lot of emphasis on industrial cooling segment. This should reduce the seasonality of the company’s business.
Sales through modern retail channels is growing at a scorching pace since past 3 years…(maybe due to low base?)
management seems very focussed on being asset light…
Dividend payout is very good to the tune of 40% plus and likely to be maintained.
This is a very high ROE business and will be generating very high free cash flow as capex is very low as mentioned in presentation.
Overall if company can grow as expected to a 1000 crores turnover company by FY 16, this can provide 2-3 times or more returns in next 2-3 years.
disc: invested.
Technically also chart seems encouraging.
The last leg of the fall from March 2013 from a high of 413 has been retraced in much quicker time as the stock price crossed it intraday recently in past two weeks. the fall was around 24 weeks whereas the retracement was done in 14 weeks.
Attached monthly line chart which shows a flag like pattern…(this is not a classical flag bcos the pole is not all that long). breakout has happened and targets are 550 plus from current levels… Again since this is a monthly chart it might take time for the pattern to play out.
THERE SEEMS TO BE A GOOD CORRELATION OF FUNDAMENTALS AND TECHNICALS HERE… LETS SEE HOW THIS PLAYS OUT.
Hitesh - Where does it say that the company expects to be a 1000Cr turn over company by FY 16?
I see that their organized retail segment is growing at 300+%; But what % of their income is the organized retail? Can you elaborate a bit about how you arrive at a rough EPS estimate for FY 16? Would really be useful for people like us.
Thanks!
You can go back in this same thread and read krishnakumar’s comment mentioning the target.
eps estimates… its a rough guess putting in 15% NPM to the target sales figures.
Now where KK gets his 1000 crore figure you will have to ask him but because he tracks the company very very closely, I tend to have full faith in his comments.
The previous page has the link…
Posting it again-
**
Now comments.
On a lighter note, Faith restored :-).Here is the link.
AR of symphony released. They have bagged orders from indian railways to cool kota and godhra stations. This in itself is a good segment if they can target it aggressively.
http://www.symphonylimited.com/pdf/AR-2012-13.pdf Link: http://www.symphonylimited.com/pdf/AR-2012-13.pdf “The result was that Symphony secured orders from a number of globally-respected Indian companies as well as the Indian Railways, providing us with the confidence that this business can be sustainably scaled over the foreseeable future.” “Received orders for the first time from railways for installing air coolers in the waiting rooms at the Kota and Godhra railway stations” In india, there are more than 8500 stations alone. http://en.wikipedia.org/wiki/List_of_railway_stations_in_India Link: http://en.wikipedia.org/wiki/List_of_railway_stations_in_India Even if we take 30% of them having the facility of waiting rooms/Lounge that can be cooled using industrial coolers just like godhra and kota, it provides scalable market for symphony. The challenge of course will be the bureaucracy and red tape. If they can take on that, symphony has long way to go. The competition with unorganized players in this segment cannot be ruled out but the way they have have garnered a brand and mind/market share in one of the business with less moat and from unorganized sector is commendable and proves their execution/management capability. It is no small feat to garner 50% share and maintaining it.
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Key takeaways from Investor Roadshow conducted recently:
1)The total domestic market (organized + unorganized) for residential air-coolers is ~5mn units with an aggregate value of ~Rs20bn. The unorganized segment account for 80% of the volume (i.e ~4mn units) and 70% of value (i.e Rs14bn).__
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2)__The total industry is growing at a robust long term growth rate of ~20%, while the organized segment is clocking ~25% growth. As the lifestyle improves and product awareness increases, the industry expects a shift from the unorganized segment to the branded products.
__3)__Symphony has a market share of ~40% and ~50% in volume and value terms respectively in the organized segment. Major competitors include Kenstar (35% market share), Bajaj Electricals, Khaitan, Usha, Oriental, Havells and others.
__4)__Majority of Symphonyâs sales originate from the north & west India (~65% of total domestic revenues), while south and east India account for 20% and 15% respectively. It is pertinent to note that even in a humid city like Mumbai; Symphony had managed to sell ~12,000 air-coolers during the last year.
__5)__The constant focus on innovations and introduction of new models every two years has enabled Symphony to maintain its competitive edge over competitors and retain the numero uno position for over five years. The company has recently introduced window coolers in both plastic and metal body. The plastic version is manufactured in India while the metallic version is imported through IMPCO.
__6)__Over 85% of the domestic sales are routed through the distributor â dealer channel on a cash and carry basis, while the balance 15% is through the large format stores on a 30-90 day credit period. 100% of the exports of residential coolers to the American continent and the Rest of World (RoW) are also undertaken under the Symphony brand.
__7)__Symphony has also tied up with many large format stores in overseas locations to boost its exports. Few examples are the tie-ups with Singer in Srilanka and Bangladesh and another tie-up with Carrefour in Indonesia. The company is in the process of exploring many more tie-ups with other large format stores in various geographies.
8)__Symphony does not own any manufacturing facility to supply residential air coolers in the domestic markets. The complete manufacturing of residential coolers for its domestic markets is outsourced to various plastic molders across different regions, with an aggregate capacity of ~1mn units. In case of supplies to the export markets, the company manufactures the coolers at its Surat SEZ facility, in order to avail the tax benefits.
__9)__Under the terms of agreement with the molders, the ownership of the designs and the mould for each model would exclusively rest with Symphony. The agreement also precludes the molders to manufacture air coolers for any brands, other than Symphony. The entire manufacture and packaging process is supervised by Symphonyâs quality control team stationed at the molders facility.
__10)__Components such as motors, pumps, cooling pads, electronics, control panels, etc. are sourced by the molders as per the price, specifications and commercial terms decided by Symphony. The plastic molders would not only manufacture the plastic cabinet, but would also assemble and pack the product and dispatch it to the distributors. The excise duties and other manufacturing taxes are paid by the molders and are accounted by Symphony through the purchase account.
__11)__The industrial and ducted coolers (IDC) are manufactured at Symphonyâs Mexico facility. While the IDC is marketed in India under the Symphony brand, the same is sold in the overseas markets under the IMPCO brand.
__12)__The company has executed many IDC projects at various overseas and domestic locations with its clientele ranging from malls, factory shop floor, factory canteen, places of mass gathering such as religious institutions, railway waiting rooms etc.,
__13)__IMPCO had sold IDC worth Rs580mn in North America while the Indian sales have been around ~Rs70mn. The domestic IDC segment is worth Rs25bn annually and is largely dominated by the unorganized segment. Symphony has recently entered this segment and it would take few years before the company garners a substantial share of the market.
__14)__Symphony expects the domestic market for residential air coolers to grow at ~15-20% p.a in volume terms coupled with a price rise of ~5-8% every year. The exports to RoW (excluding North America) are expected to growth at ~25-30% while the sales at IMPCO (residential air-coolers and IDC) are expected to report steady growth.
Thanks for the detailed update Nikhil. Much appreciated.
Thanks Nikhil for putting the updates
thanks nikhil for the update.
just a rough calculation on the symphony’s standalone growth estimate as per their investor’s update.
15-20% (volume) for domestic market
Last year domestic sales was 4.37 lakh coolers, so an avg of 18% growth - 5.16 lakh coolers.
Avg realisation was 6156 per unit.
An avg price increase of 7% gives an estimate of 6586 per unit.
so 5.16 lakh * 6856/- 339 crores for domestic market alone.
If exports can grow 25%, the exports(excluding impco) comes to 43 crores from 35 crore export.
adding up other income, the sales reaches close to 400 crores which is 25% growth.
Last year exports did not pick for impco underperformed, and this time it should be better. So overall scenario looks good.
The IC should see good traction this year too and with the recent tie ups, exports should be better than 25% is what i believe.
I attended the AGM of symphony today at ahmedabad…
The main guy Mr Achal Bakeri sounded very very confident and optimistic about the future of his company.
One sentence of his was quite interesting.
“We are not interested in cooling people… We are interested in making money…:-)”
Regarding the potential his point of view was that “we are just scratching the surface in room and industrial cooling”
Addressable market remains huge and there is a gradual shift in preference from the unorganised to the organised players.
About acquisitions, his reply was that they would consider acquiring a company only if it was a no brainer… His criteria was that payback for his investment has to be a year or less.
Exports provide better margins…
Company supplies to domestic retailers only on cash… Even on exports there has to be cash before they supply… Big retailers are sold products on some credit.
Margins in industrial cooling segment is comparable to room cooling segment.
Industrial coolers division is shaping up well.
The subsidiaries are likely to end up dec quarter with negilgible inventory and receivables…(this seemed to be a problem area earlier.)
With subsidiaries likely to chip in profits (as compared to loss in fy 13), fy 14 should be good for the company performance.
Div payout is likely to remain high.
My inferences:
this is a company faced with a huge addressable and growing market in the domestic and export arena.
Business model is very asset light… All the domestic production is outsourced and that for exports is from an SEZ. This should lead to high free cash generation.
Severity of summer in its addressable market remains the key monitorable… The growth in industrial cooling segment should reduce the seasonality of the business and also reduce dependence on room cooling alone. Industrial cooling segment clocked 54 crores sales out of total sales for fy 13 which was 392 crores.
Looks attractive even after the recent run up.
disc: invested.
[ Comment too short ]
Hitesh Bhai,
Thank you for the details. Industrial cooling is looking good and the window aircooler can turn out to be a game-changer with more inroads into the un-organised segment.
If they get over Impco hiccups and really get the export segment also going its can have revenue running up in all the seasons. Summer overall has seen temp rising every year, even if there are sporadic rains or early rains the heat is becoming intolerable atleast in one month of the year. I see many Symphony aircoolers in Bangalore restaurants and know a few people who bought it last summer.
Discl: Invested
Cheers
Vinod
