SYMPHONY - A Comfort to hold for Long term?

Complete Details from the June 2024 Conference Call

The sources provide a transcript of Symphony Limited’s Q1 FY25 Earnings Conference Call, held on 6 August 2024. Here is a detailed summary of the key information discussed:

Financial Performance:

  • Record-breaking quarter: Symphony achieved its highest ever quarterly revenue, EBITDA, and PAT in Q1 FY25.
  • Consolidated Revenue: ₹ 531 crores, representing a 76% year-on-year growth compared to Q1 FY24.
  • Consolidated EBITDA: ₹ 112 crores, nearly doubling compared to the previous year and achieving a 21% margin.
  • Consolidated PAT: ₹ 88 crores, a significant increase from ₹ 24 crores in Q1 FY24, representing a 16.6% profit margin.
  • Symphony India Revenue: ₹ 373 crores, demonstrating a remarkable 116% year-on-year growth.
  • Symphony India EBITDA: ₹ 82 crores, a substantial improvement from ₹ 7 crores in the previous year.
  • Symphony India PAT: ₹ 69 crores, marking a 375% surge compared to Q1 FY24 and translating to an 18.4% profit margin.
  • Subsidiaries (excluding exports from Symphony India):
    • Revenue: ₹ 158 crores, a 22% increase.
    • EBITDA: ₹ 29 crores, up 41%.
    • PAT: ₹ 20 crores, more than double the previous year’s figure.

Key Drivers of Performance:

  • Strong Summer and Heat Wave: The intense summer and heat wave in India played a significant role in driving air cooler demand.
  • Successful Execution of Strategies: The “Symphony Transformation Phase 3” initiatives contributed to the strong performance.
  • Product Penetration and Perseverance: Expansion into semi-urban and rural markets, along with a well-suited product portfolio, played a crucial role.
  • D2C Growth: The direct-to-consumer (D2C) segment experienced significant growth and achieved profitability, with EBITDA margins now in line with traditional trade.
  • Entry into Adjacent Product Categories: The introduction of new products like tower fans and storage water heaters received a positive response.
  • Improved EBITDA and PAT Margins: The expansion in gross margin, operating leverage due to top-line growth, and successful cost control measures contributed to improved margins.
  • Strong Subsidiary Performance: IMPCO Mexico and GSK China performed exceptionally well, contributing to the overall positive results.

Brand Performance Highlights:

  • Dominant Google Search Share: Symphony held over 60% of the Google search share for the air cooler category, indicating strong brand awareness and consumer preference.
  • Impressive YouTube and OTT Search Performance: Over 540 million impressions and 130 million views were registered on YouTube and OTT platforms, showcasing the effectiveness of Symphony’s digital marketing campaigns.
  • Strong D2C Website Traffic: Symphony’s D2C website attracted over 4 million visitors in the past 12 months, reflecting increasing consumer interest in purchasing directly from the brand.
  • Innovative Sales Channels: Initiatives like partnering with Blinkit for quick deliveries demonstrated Symphony’s focus on enhancing customer experience and convenience.

Overseas Subsidiaries:

  • IMPCO Mexico:
    • Revenue grew by 46% year-on-year, exceeding ₹ 100 crores for the first time in any quarter.
    • PAT grew by 77%, showcasing robust profitability.
  • Climate Technologies (Australia):
    • Faced demand headwinds and macroeconomic challenges, leading to a decline in revenue.
    • Successfully implemented Part 1 of a business transformation plan, helping to contain EBITDA and PAT despite lower revenue.
    • Management expressed optimism about exceeding last year’s sales figures for the remainder of the fiscal year, citing order backlogs due to logistical delays.
  • GSK China:
    • Achieved strong top-line and bottom-line growth, driven by cost reductions and operational improvements.
    • Repaid approximately ₹ 7 crores of its outstanding loan from Symphony India, with expectations of further repayments in the current year.
    • Serving as a manufacturing source for IMPCO Mexico and Climate Technologies Australia, leveraging its cost advantages to benefit other subsidiaries.
  • Symphony Brazil:
    • Experienced minimal sales due to the off-season (winter in Brazil).

Shareholder Payout:

  • Buyback: ₹ 71.40 crores buyback approved, representing 10% of the company’s net worth at ₹ 2,500 per share.
  • Interim Dividend: 50% interim dividend declared, amounting to ₹ 1 per share with a face value of ₹ 2.
  • Total Payout: Approximately ₹ 97 crores, including buyback, dividend, and associated expenses.

New Product Launches:

  • Air Coolers: 17 new air cooler models were launched across 6 ranges, including innovative features like quiet operation, high airflow, and advanced air filtration.
  • Storage Water Heaters: Symphony re-entered the storage water heater category with the launch of three ranges (SPA, SOUL, and SAUNA) featuring unique selling propositions like 9-layer water filtration technology (PUROPOD) and AI-enabled smart controllers.

Outlook:

  • Positive Outlook: Management expressed optimism about the future, citing factors like climate change, below-normal trade inventory, innovative products, and expansion into new markets.
  • Sustainable Growth: Symphony aims to achieve a compounded annual growth rate (CAGR) in line with its historical performance.
  • Category Growth Potential: Management believes that the air cooler category has significant growth potential, driven by factors like rising temperatures, energy efficiency concerns, and increasing affordability.
  • Industrial Cooling: While the industrial cooling segment saw growth, it’s yet to reach an inflection point. Symphony remains committed to this segment and anticipates future growth opportunities.

Key Takeaways:

  • Symphony delivered exceptional performance in Q1 FY25, driven by a combination of favourable market conditions, strategic initiatives, and operational excellence.
  • The company is leveraging its strong brand, innovative products, and expanding distribution network to capitalize on the growing demand for air coolers in India and globally.
  • Symphony’s entry into adjacent product categories like storage water heaters reflects its strategic diversification efforts and aim to build a more year-round business.
  • The strong performance of overseas subsidiaries, particularly IMPCO Mexico and GSK China, demonstrates Symphony’s successful international expansion strategy and ability to navigate diverse market conditions.

Domestic Limitations:
With around 50% of the domestic market already captured, Symphony faces challenges in generating significant new revenue from this segment.

@Dinesh_476 Looks like above statement from you is factually incorrect. Are you talking about market share?? If so you should also mention that market share is split between Organised and unorganised. As per management market share from Unorganised sector accounts for roughly 70 to 75%. So from the remaining 25% to 30% which is from organized market, Symphony has market share of 50%. So now think what is th overall market share Symphony has in Indian Air cooler segment and consider Aircooler penetration in India, CAGR growth this segment is achieving, raising demands from commercial and industrial segments etc. Symphony brand has way to go in India itself.

@PraveenKG Agree to the point that 50% refers to organized market share. which is 25% of overall market share (organized + unorganized).

It would be interesting to see, how symphony will overcome the below challenges in unorganized market.

  • Price Sensitivity: Consumers in the unorganised market are highly price-sensitive. Symphony’s products, while known for their quality and innovation, are priced at a premium compared to unorganised sector offerings. This price difference makes it difficult for Symphony to attract consumers who prioritize affordability.

  • Limited Product Differentiation: Although Symphony offers a wide range of products, the unorganised sector often imitates the designs and features of successful models. This imitation blurs the lines of product differentiation and forces Symphony to compete on price, a strategy that may not be sustainable in the long run

  • Deeply Entrenched Unorganised Sector: The unorganised air cooler market in India remains substantial, estimated at around 70-75% of the total volume. This long-standing presence makes it difficult for organised players like Symphony to make significant inroads, as consumers in smaller towns and rural areas often prefer familiar and readily available local alternatives.

  • Lower Entry Barriers: The air cooler industry has relatively low entry barriers, which allows numerous small, unorganised manufacturers to operate. This fragmented nature of the unorganised sector creates intense competition and makes it challenging for Symphony to establish a dominant presence.

So finally what Symphony holds is only 12.5% of total Air cooler market at present.

Symphony launches geysers, pretty nice ad as usual.

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