Buy Symphony; target of Rs 1418: Geojit Research

Geojit's research report on Symphony

Symphony is the largest air cooler manufacturer with a market share of ~50% in the organised market in India, a testimony of its strong brand equity.  Symphony enjoys a strong R&D advantage, thereby enabling the company to launch more than 40 new products in the last six years.  Its asset light business model has enabled the company to sustain its EBITDA margin level above 20% and ROCE above 40% over the years.  Introduction of premium range of air coolers will prove to be margin accretive in the long run. Hence, we estimate EBITDA margin of 27.6%/ 28% in FY18E/19E.  Revenue/PAT to grow at 20%/22% CAGR over FY17-19E due to uptick in volume growth.  We value the stock at 40x FY19E EPS arriving at a target price (TP) of Rs. 1,418

Outlook

Symphony’s leadership position and consistent new product launches lend strong revenue growth visibility. As a result, we expect consolidated revenue/PAT to grow at a CAGR of 20%/22% over FY17-19E. The stock currently trades at 41.9x/34.8x FY18E/19E EPS. We value the stock at 40x FY19E EPS arriving at a target price (TP) of Rs. 1,418.