Buy Symphony; target of Rs 1686: HDFC Securities

HDFC Securities' research report on Symphony

Domestic revenues grew by 128% (vs. exp. of 80%) owing to a harsh summer, market share gains and favorable base. Consumer offtake was healthy across markets and channels in India. Adjusting for soft base, domestic revenues still grew by strong 35% vs. 1QFY18. As per management, they held back ~Rs 150-200mn of potential sales to avoid any pileup of inventory in trade prior to the new season. Channel inventory is now at historical lows and dealer sentiments are positive (seen high inventory pressure over the last 2 years). After a gap of 2 years, co. has launched 7 SKUs and re-launched 7 SKUs in the domestic residential coolers. Trade sentiments are positive (unlike other appliances categories), hence pre-booking for new launches is robust. July off-season sales have grown at a healthy pace. We expect ~30% growth for domestic business over 2Q- 4QFY20.

Outlook

Symphony’s 1Q performance was a blowout, even beat our aggressive estimates. 1Q performance has proved the naysayers wrong about the relevance of air coolers (in the era of fast growing RAC) and Symphony’s market share loss. Growth visibility for FY20E is high despite slowdown in macros owing to low channel inventory and new launches. We maintain our estimates and value Symphony at 45x Jun- 21 EPS, arriving at a TP of Rs 1,686. Maintain BUY.