Buy Symphony; target of Rs 2745: ICICI Direct

Symphony’s net sales increased 38% in Q1FY17 led by 33% YoY volume growth supported by severe summer during April-May 2016.  The sales growth was largely dominated by volume growth while realisation growth was on account of the launch of new products. Domestic sales recorded growth of 34% YoY while export sales increased 100% YoY The sharp expansion in EBITDA margin by 735 bps YoY can be attributed to saving in selling & distribution and other expenses by 421 bps and 255 bps YoY, respectively. As a result, PAT recorded sharp growth of 40% YoY in Q1FY17 According to the management, the recovery in subsidiary Impco is on track while Symphony’s Chinese acquisition is progressing as per schedule with integration process expected to end in three months.

We believe the air cooler industry will grow at 19% CAGR in FY15-25E, due to demand remaining intact in tier-II and tier-III cities. Currently, the air cooler industry is largely dominated by the unorganised segment (80% volume market share). We believe a shift from the unbranded to the branded category (due to rising aspiration level) opens up a huge opportunity for organised players to grow at 25% CAGR in FY15-25E. We have modelled sales and earnings CAGR of 25% and 28% in FY15-18E, led by strong volume growth in the wake of better monsoon, implementation of Seventh Pay Commission, GST. We use DCF method for valuation, assuming revenue CAGR of 25% (FY15-25E), terminal growth of 5%, WACC of 11% and maintain our target price at Rs 2745.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.