Symphony - On strong footing - IDBI Capital

Symphony Ltd. reported revenue de-growth of ~16% YoY, in-line with expectation, due to postponement of sales to Q2FY13 (as the company plans to launch new models). OPM declined significantly due to lower revenues. APAT increased by ~57% YoY and was better than estimate due to no tax provision and higher other income. The management has guided for a strong Q2FY13, due to a high unexecuted order book of Rs 403.6 mn for which full advance has been received from dealers/distributors. Maintain HOLD with a target price of Rs383 (14x FY14).

Result Highlights

Revenue de-growth of ~16% YoY, in-line with expectation

Symphony reported revenue de-growth of ~16% YoY due to air-cooler volume de-growth of ~13% YoY (domestic volume down by ~10% YoY; export volume de-growth of ~29% YoY). Decrease in domestic air cooler volume is due to delay in supply, as the management plans to introduce new models in the upcoming season (FY13). These new models would be delivered from Q2FY13. The delay in air-cooler supply will not affect sales for FY13 as the major selling time period is Jan-June to end consumer. During the quarter, the company received air cooler orders of Rs603 mn (up 242% YoY).For all these orders the company has received full advance payment.

OPM at ~1%, lower than expected

Symphony reported OPM of ~1%, decline of ~990 bps YoY due to lower revenue during the quarter. As Symphony's revenues are cyclical, OPM's vary significantly QoQ. We estimate standalone OPM to remain flat in FY13 at ~27.5%.

- APAT growth of ~57% YoY, better than estimate, due to no tax provisioning APAT increased ~57% YoY due to no tax provisioning and higher other income. Tax provisioning was not done during the quarter as other income primarily was from tax free bonds and also revenue from SEZ is tax free. However, for FY13, the company has guided for ~28% tax rate. Other income increased ~133% YoY due to high cash on books as on 30th June,2012.

Strong order book to enable high growth

Symphony has an unexecuted domestic order book of Rs403.6 mn (up ~1988% YoY) for ~72000 cooler units (up ~1791%) as on 30th September,2012. These orders will be executed during Q2FY13 and it has received full advance payment for it. These orders are primarily from dealers/distributors as they exhausted their air-cooler inventory in the previous quarter due to unexpected demand. The strong order book to be executed for which the company has received full advance provides visibility in earnings for FY13. We have factored ~25%YoY growth in domestic business for FY13.

Outlook and Valuation

Symphony had a tepid quarter in a seasonally dull quarter due to delay in delivery of air coolers as the company plans to introduce new models in the upcoming season. Going ahead, with a strong order book, we expect Symphony to post robust Q2FY13 despite it too being a seasonally dull quarter. We continue to be positive on the future growth prospects and the space in which the company operates. Symphony currently trades at a PER and EV/EBIDTA of 14.6x and 9.8x FY14E. We continue to maintain HOLD with a target price of Rs383 (14x FY14E).

Key risks: A weak summer season.

Source : Equity Bulls

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