December 4, 2012
COMPANY MANAGEMENT
REPORT VISIT NOTE
Analyst Arun Baid +91-22-4322 1258 arun.baid@idbicapital.com
Symphony Ltd.
Strong order book provides high visibility
BUY
We attended the AGM and also met with the management of Symphony Ltd. The following are the key takeaways: The market share of the company in the organized air-cooler market in India has increased by ~500 bps in FY12 to ~50%. The company is witnessing high demand in the domestic markets for air-coolers from dealers. The demand is high as dealers depleted inventory significantly due to unexpected surge in demand during May-June, 2012. Over the period July-Nov,2012 the company has received ~Rs1bn orders from its dealer/distributors. For these orders the company has received 100% cash advances. Of these orders ~Rs250mn worth was dispatched in Q1FY13 and the rest will be delivered during Oct,2012-Jan,2013 period. The company has taken a price increase of ~9-13% in various models and on a weighted basis ~10% for the entire portfolio from 16th November, 2012. The price increase has been taken due to additional cost for new models launched. In India, the company is seeing increased traction from modern retail format and it contributed to ~9% of revenue (~4% in FY11). The company is hopeful of this being an additional growth driver in coming years. The company is increasing its focus on export markets and believes its strategy of hiring country managers will deliver in the longer term. Exports contributed ~16% of domestic turnover in FY12. The management has re-iterated its stand to continue to focus on air-cooler only and not diversify the product portfolio. In order to address the seasonality factor it is increasing its focus on exports, creating demand in mini summer season (Sept-Oct) and also ensuring dealers buy inventory during the off season due to the discounts offered during that period (15%-18% annualized). The delivery of new models has started from Diwali. The delivery of new models has been delayed by 35-40 days due to ramp in production. STORM model launched in FY12 has seen high success with it being stock-out in peak season of FY12. The demand momentum continues and it has seen high advance orders for it in FY13. The company is planning to further increase its distribution network by ~33% to 20,000 dealers in FY13. Also it plans to increase its presence from ~4336 towns & cities in FY12 to ~5119 in FY13. IMPCO, Mexico will focus on consolidation this year in order to improve its working metrics. The management is targeting modest growth in FY13 from this subsidiary. Management expects high growth from industrial/commercial air coolers from both international/domestic markets in years ahead due to untapped market potential. It has seen high traction for this segment from newer geographies such as Saudi Arabia etc.
Nifty: 5,871; Sensex: 19,305
CMP Target Price Potential Upside/Downside Key Stock Data Sector Consumer Durables Bloomberg / Reuters SYML IN / SYMP.BO Shares o/s (mn) 35 Market cap. (Rs mn) 11,018 Market cap. (US$ mn) 201 3-m daily average vol. 24,331 Price Performance 52-week high/low -1m Absolute (%) 3 Rel to Sensex (%) 0 Shareholding Pattern (%) Promoters FIIs/NRIs/OCBs/GDR MFs/Banks/FIs Non Promoter Corporate Public & Others Relative to Sensex
180 160 140 120 100 80 60 Dec-11 May-12 Nov-12 Jan-12 Apr-12 Jun-12 Feb-12 Mar-12 Aug-12 Aug-12 Sep-12 Oct-12 Jul-12
Rs315 Rs383 +22%
Rs416/173 -3m -12m (9) 16 (20) 1 75.0 0.7 0.4 11.8 12.1
Outlook and valuation
We expect Symphony to witness earning CAGR of ~33% during FY12-14 and its strong order book provides earning visibility. We continue to be positive on the growth prospects and the space in which the company operates. The stock has corrected by ~21% since our last update (Oct16, 2012) and thus provides a good entry opportunity. We thus upgrade the stock from HOLD to BUY with an unchanged target price of Rs383 (14x FY14). Table: Financial snapshot
Year FY11 FY12 FY13E FY14E Revenue EBITDA EBITDA (%) 2,905 3,184 3,951 4,739 687 782 989 1,187 23.7 24.6 25.0 25.0 Adj. PAT 506 538 788 956 14.5 15.4 22.5 27.3 21.8 20.5 14.0 11.5 15.8 12.9 9.5 7.4 46.8 33.8 38.4 37.4
(Rs mn)
EPS (Rs) P/E (x) EV/EBITDA (x) RoE (%) RoCE (%) 51.9 40.8 41.4 39.9
SYML
Sensex
Source: Capitaline
Source: Company; IDBI Capital Research
Management Visit Note Symphony Ltd. Figure: No of air cooler sold
600,000 500,000
400,000
300,000
CAGR 33%
200,000
148,890 253,304 406,660 485,937
FY07
Source: Company; IDBI Capital Research
112,998
100,000
FY08
FY09
FY10
FY11
FY12
Figure: Revenue and PAT
6,000 5,000 4,000
(Rs mn)
4,739.3 3,950.9 3,183.9
3,000 2,000
2,904.6 1,902.3
732.9 148.9 1,241.7 217.6
472,665
1,000 0
366.5 FY10
Revenue
505.6
538.1
788.4
955.9
FY08
FY09
FY11
PAT
FY12
FY13E
FY14E
Source: Company; IDBI Capital Research
Management Visit Note Symphony Ltd.
Financial Summary
Profit & Loss Account
Year-end: June Net sales Growth (%) Operating expenses EBITDA Growth (%) Depreciation EBIT Interest paid Other income Pre-tax profit Tax Effective tax rate (%) Net profit Adjusted net profit Growth (%) Shares o/s (mn nos) FY11 2,905 52.7 (2,217) 687 28.7 (53) 634 (1) 118 752 (246) 32.7 512 506 38.0 35 FY12 3,184 9.6 (2,402) 782 13.8 (49) 734 (8) 14 733 (202) 27.5 531 538 6.4 35 FY13E 3,951 24.1 (2,962) 989 26.4 (52) 937 (1) 159 1,095 (307) 28.0 788 788 46.5 35
(Rs mn)
FY14E 4,739 20.0 (3,553) 1,187 20.0 (53) 1,134 (2) 196 1,328 (372) 28.0 956 956 21.3 35
Cash Flow Statement
Year-end: June Pre-tax profit Depreciation Tax paid Chg in working capital Other operating activities Cash flow from operations (a) Capital expenditure Chg in investments Other investing activities Cash flow from investing (b) Equity raised / (repaid) Debt raised / (repaid) Dividend (incl. tax) Chg in minorities Other financing activities Cash flow from financing (c) Net chg in cash (a+b+c) FY11 752 783 (247) (545) 0 742 (1,357) 30 (939) 1 (20) 236 216 19 FY12E 733 49 (192) 291 (0) 881 (47) 0 (550) 77 (81) 60 56 387 FY13E 1,095 52 (307) 105 0 946 (30) (1,060) (77) (224) (301) (415)
(Rs mn)
FY14E 1,328 53 (372) (135) (0) 873 (30) (640) (231) (231) 3
Balance Sheet
Year-end: June Net fixed assets Investments Other non-curr assets Current assets Inventories Sundry Debtors Cash and Bank Loans and advances Total assets Shareholders' funds Share capital Reserves & surplus Total Debt Secured loans Unsecured loans Other liabilities Curr Liab & prov Current liabilities Provisions Total liabilities Total equity & liabilities Book Value (Rs)
Source: Company; IDBI Capital Research
(Rs mn)
FY11 704 0 1,428 697 386 48 179 2,132 1,525 70 1,455 2 2 47 637 560 77 607 2,132 37 FY12E 702 2,075 429 422 434 170 2,777 1,891 70 1,822 79 74 4 134 831 752 79 886 2,777 54 FY13E 680 2,766 434 472 19 191 3,446 2,449 70 2,379 2 2 57 1,017 940 77 997 3,446 63 FY14E 658 3,613 497 601 22 234 4,271 3,126 70 3,056 2 2 57 1,165 1,088 77 1,145 4,271 83
Financial Ratios
Year-end: June Adj. EPS (Rs) Adj. EPS growth (%) EBITDA margin (%) Pre-tax margin (%) ROE (%) ROCE (%) Turnover & Leverage ratios (x) Asset turnover (x) Leverage factor (x) Net margin (%) Net Debt / Equity (x) Working Capital & Liquidity ratios Inventory days Receivable days Payable days 88 49 53 49 48 20 40 44 27 38 46 26 1.8 1.5 17.4 (0.1) 1.3 1.5 16.9 (0.5) 1.3 1.5 20.0 (0.7) 1.2 1.5 20.2 (0.7) FY11 14.5 38.0 23.7 25.9 46.8 51.9 FY12 15.4 6.4 24.6 23.0 33.8 40.8 FY13E 22.5 46.5 25.0 27.7 38.4 41.4 FY14E 27.3 21.3 25.0 28.0 37.4 39.9
Valuation
Year-end: June PER (x) Price / Book value (x) PCE (x) EV / Net sales (x) EV / EBITDA (x) Dividend Yield (%) FY11 21.8 8.5 19.7 3.7 15.8 0.6 FY12 20.5 5.8 18.8 3.2 12.9 1.7 FY13E 14.0 5.0 13.1 2.4 9.5 1.8 FY14E 11.5 3.8 10.9 1.8 7.4 2.2
3
Management Visit Note Symphony Ltd.
Notes
Sonam H. Udasi Head Research Dealing
(91-22) 4322 1375 (91-22) 6637 1150
sonam.udasi@idbicapital.com dealing@idbicapital.com
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