ICICI Direct is bullish on Symphony recommended buy rating on the stock with a target price of Rs 960 in its research report dated November 12, 2020.
ICICI Direct's research report on Symphony
Symphony’s consolidated Q2FY21 performance was mainly impacted by slow recovery in the domestic demand of air coolers. Consolidated revenue fell ~30% YoY led by ~44% YoY fall in revenue of domestic business. However, overseas businesses was relatively less impacted and revenue increased ~4% YoY during the pandemic led by Climate Technologies Australia. Profitability was largely impacted higher raw material prices (in Australia) due to disruption in supply and lower operating leverage. The management expects a slight delay in recovery of primary sales YoY as dealer’s focus remained on liquidating existing inventory (~40% of pre-Covid volume). On the international front, business in Australia saw improved demand with subsidiary sales up ~8% YoY in H1FY21. While Chinese business is on recovery mode, the Impco Mexico performance was impacted by bankruptcy filed by one of the key clients (contributed ~10% in Impco’s topline). The management has further guided at maintaining gross margin despite a shortfall in revenue in FY21 largely impacted by weak H1FY21. Further, its asset light model and various other cost optimisation measures (like travel & conveyance cost, legal & professional cost, etc) would further provide cushion to EBITDA margin, going forward. While we revise our FY21E, FY22E earnings estimate downside by ~16%, ~9%, respectively, we continue to maintain our positive stance on the stock considering its strong brand patronage, robust balance sheet (cash of Rs ~532 crore with strong RoE/RoCE).
We expect a better H2FY21 compared to H1 led by refilling of trade inventory at the start of summer. We continue to like Symphony for its leadership position in the domestic air cooler market and a robust balance sheet condition. We reiterate our BUY rating on the stock and maintain target price of Rs 960 (valuing 30x FY22E).
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