ICICIdirect.com's report on Symphony
Symphony recorded moderate volume growth of ~13% YoY during Q3FY15, helped by sales growth of ~21% YoY. Unseasonal rain coupled with a change in product mix restricted domestic volume growth to the tune of ~15% YoY to ~Rs 112 crore. Exports sales volume growth at 9% YoY was largely hit by political disruptions in Middle East regions. Symphony has an organised market share (value) of ~50% with top three brands comprising ~40% of sales
Expansion in gross margin by ~300 bps YoY due to benign raw material prices was partially offset by ~200 bps and ~90 bps YoY increase in selling & admin expenses and employee cost, respectively. As a result, the EBITDA margin increased 124 bps YoY
Increase in EBITDA margin coupled with sharp growth in other income helped PAT grow ~35% YoY to ~Rs 37 crore
"We believe the air cooler industry will grow at ~16-18% CAGR in FY14-25E, 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) provides huge potential for organised players to grow at 28% CAGR in FY14-25E. Symphony being the market leader is expected to benefit the most from this structural shift in the long run. We expect Symphony to record ~25% volume CAGR in FY14-25E. We have used the DCF method to value the company, assuming revenue CAGR of ~28% FY14-25E, terminal growth of 5% and WACC of 11.4% to arrive at a target price of Rs 3101/share. Buy the stock", says ICICIdirect.com research report.
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