We expect a strong recovery in domestic air‐cooling market to continue in FY23, now with
lower commodity prices margins are set to improve and return to pre‐covid levels. We
expect FY22‐24E growth trajectory of 17% revenue CAGR. Considering higher operating
leverage, we estimate FY21‐24E EBITDA and PAT CAGR of 26% each. we maintain BUY
with the PT of Rs1,223 valuing it at 40x FY24EPS. Current CMP offers good entry point.
YES Securities.
The brokerage remains positive on the domestic business outlook (led by low channel inventory); however, due to weak profitability for CT, it cuts FY23/24/25 EPS by 5/3/3%. It values the stock at 35x P/E on Sep’24E EPS and derive a TP of INR 1,150. HDFC Securities.
FY23Q2 concall notes
- Domestic business is doing very well, trade channel is very buoyant
- Australian business was muted because orders for USA was shifted to Q3 and Q4 due to shipping issues (no order cancellation)
- Launching new models in US and exploring new sales channels including large format stores, ecommerce & D2C
- EBITDA margins were lower because of additional costs for market research and trade channel incentives (6 cr.; one-time), higher freight expenses for exports to Brazil (3 cr.) and higher warranty expenses (because of higher sales from retailers and will persist going forward)
- Will reach pre-covid EBITDA margins over a period of time
- Commercial air coolers have higher margins vs domestic air coolers
Disclosure: Not invested (no transactions in last-30 days)
4 Likes
Company’s ability to take price hikes from here, will determine the future stock performance.
@rizulagg Agreed! Symphony has gained the highest ever quarterly revenue of Rs 250 crore by both licensing and device sales. If this number remains persistent, their stock will surely perform well in future.
The shares of Symphony are down more than 20% in a year’s period. The consumer goods stock has declined over 16% in 2022 (YTD) so far.
Q3 FY23 board meeting and results is on 8th Feb 2023. Apparently company might consider Share Buyback also.
15% upside from here. (CMP= 1121)
Notes from some recent calls.
09.12.2022 CNBC interview
- Targeting ambitious sales growth in H2FY23. Medium term goal is to grow sales at 20%
- Raw material prices have come down but are higher vs last year. Price hikes have been between 5-14% depending on models in last 6-months
- Should reach normal EBITDA margins by June 2023
- Witnessing pressure from USA, orders have been cut and this will get reflected in December and March quarters
07.06.2023 CNBC
25.12.2023 BQ
- FY25 promises to be much better, business is at trough right now and will only get better
- Australia fund infusion of 82 cr. is to largely repay debt
- Australian real estate business is improving which should positively impact Symphony, this is similar to transformation in Mexican operations after 2008 GFC crisis
Disclosure: Not invested (no transactions in last-30 days)
2 Likes
What is the collective opinion on this forum on how Symphony is growing? Below are some of the questions i am pondering -
(1) The market size is unquestinably big. With electricity costs rising, high humid climate every year, with 50% market share, I would assume that Symphony can grow easily by 20-30% or so each year in India, but that has not happened in the last 10 years… why?
(2) Their foray into International markets has not seemed to have gone well. Australia was a disaster in a way. They are recovering but in retrospect, was it a good bet and why they could not succeed? They did okay in Mexico but not in Australia.
(3) They are not having high debt which is good. Relatively decent inventory turns. How is their overall capital allocation strategy in your view in the absence of seemingly slow growth over a long term?
1 Like
Large part of India is humid and as such coolers don’t work well. Secondly, air conditioners have become cheaper over time. Thirdly, the competition is fierce in the cooler space and customers are more price conscious.
It is difficult to make a case for large sustained growth in the segment by any company in India.
10 Likes
With the price difference and ever increasing electricity cost, I assumed that air coolers will make a dent but all indications seems to prove me wrong. You maybe right.
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It’s more about electricity cost rather than one time buying price which matters for lower middle class people who creates volumes in air cooler space. That’s what my understanding is. Having said that competition is all over in the air cooler segment and there is strong chance of margin decline even though revenue can be incremental in double digit in near future. For symphony from 2020 onwards each summer they have new story to tell about the dismal performance. I’m still giving them benefits of doubt and looking for the current summer season for actual things to get unfold.
Disc: Invested
2 Likes
The big problem with Symphony has been Margin Compression.
This has happened because of inability of company pass on rise in costs, due to severe competition in domestic market.
Also growth has stagnated in international markets.
The only hope of light is recovery in volume growth in domestic market, with margins stabilizing. Also, recovery of demand in US Markets, will definitely help as this market has highest margins, which will reflect in March Quarter.
1 Like