Motilal Oswal neutral on Symphony; target of Rs 1400

Motilal Oswal's research report on Symphony (SYML)

"Symphony (SYML) reported 1QFY15 results, with revenue of INR1b (est. INR0.9b), compared to INR0.7b in 1QFY14, growth of 42%. Domestic revenue grew by 43% to INR956m, while exports revenue grew by 38% to INR71m. Domestic growth was robust due to higher contribution from newer products and stronger demand due to delayed monsoon. SYML is focusing on reducing the seasonality in the business and thus improving sales in offseason quarters. Despite 1Q historically being the smallest period for SYML, during the quarter it sold coolers to ~2,000 dealers -- a testament of its efforts to reduce seasonality. EBITDA grew by 71% this quarter to INR238m, with EBITDA margin expanding ~400bp to 23.2%. Hence, PAT for 1QFY15 stood at INR216m, compared to INR135m in 1QFY14, marking a YoY growth of 60.5%."

"During the quarter, SYML received a large export order exceeding USD1m from the African market for residential air coolers, revenue of which was partially booked this quarter, while the balance will be booked in 2QFY15. Management guided that over the last two quarters, Africa has been a focus area for the company, which is visible in new order wins. Going forward, management expects to aggressively establish distribution networks in countries like Vietnam, Singapore, Brazil and Philippines to drive growth in international operations. With the size of global air cooler market (excluding India and China) standing at 7m units versus India’s market size of 6m units, SYML’s export sales of ~1.6 lakh units has huge growth potential."

Valuation and view: "We believe that SYML will continue to dominate the cooler market with new product launches and strong growth prospects in the international market. We expect the company to record 27% revenue CAGR and 29% PAT CAGR over FY15E-17E. The stock trades at 37.2x and 27.6x FY16E earnings. We raise FY15E / FY16E earnings by 7% / 11% resp. and recommend a Neutral rating, with a target price of INR1,400, valuing the stock at 25x FY16E", says Motilal Oswal research report.

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