Q3FY18 Result Update Consumer Durables Symphony Ltd. BUY CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 2) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L Shareholding Pattern (%) Jun17 Promoter 75.0 FII 6.8 DII 6.0 12.2 1,815 2,160 19.0% 36,030 11,053 517385 SYMPHONY SYML:IN 7.0 12,705 59,938 2,209 / 1,152 Sep17 Dec17 75.0 75.0 7.6 7.5 5.5 11.9 10.4 New launches, better mix to drive growth Symphony Ltd delivered healthy set of numbers for Q3FY18 with net revenue & PAT growth (standalone) of 20.9% & 2% YoY, marginally above our estimates. Aided by lower material cost & overhead expenses (as a % to net revenue), EBITDA margins expanded by 255bps YoY to 39.9%, which was encouraging. Going forward, we expect Symphony to maintain its healthy growth momentum, given the robust outlook of domestic air cooler industry, company's strong brand recall and its continued efforts towards innovative offerings and expanding reach. We recommend BUY on the stock with revised target price of Rs 2,160. Q3FY18 Result Update: increased by 20.9% YoY to Rs 217.6cr, driven by healthy volume offtake (more or less in line with the value growth as per the management), as dealers restocked the inventory ahead of onset of summer to get better discounts. New range of products 'Silver and Diamond' with six variants were launched during the quarter. Further, the cloud series products launched in 2017 continued to perform well. Realizations remained stable during the quarter, supported by withdrawal of introductory pricing in touch series products w.e.f July 01, 2017. EBITDA grew by 29.1% YoY to Rs 86.8cr, while EBITDA margins expanded 255bps to 39.9% (highest in the past 7 quarters), which was impressive. The gains were led by lower material cost, moderation in A&P spends and other expenses (down 71bps, 102bps & 80bps YoY as a % to net revenue). PAT grew by 2% to Rs 66.3cr, relatively lower than growth in EBITDA, impacted by lower other income and higher tax expense. Other key highlights: i) GST implementation has started to yield benefits to organized players, as impact on pricing is visible at the unorganized level, leading to loss in their market share in the air cooler segment; ii) China business is moving in line with strategy and the management expects a turnaround in its operations on the profit front in the next 23 years; iii) CAPEX would be negligible due to outsourcing business model. 1 Year relative price performance 190 180 170 160 150 140 130 120 110 100 90 80 Jan17 Feb17 Mar17 Apr17 May17 Research Analyst Jun17 January 31, 2018 Jul17 Symphony Aug17 Sep17 Ni y Oct17 Nov17 Mehernosh Panthaki, CA mehernosh.panthaki@religare.com Dec17 Jan18 Outlook & Valuation: We expect Symphony's consolidated and PAT to grow by 18.4% & 2% CAGR respectively over FY1720E, led by robust demand outlook of organized air coolers market (Symphony is a market leader, commanding >50% market share) and company's efforts towards innovative launches, brand building initiatives and anticipated turnaround in the overseas operations. Volume growth would remain healthy. EBITDA margin expansion would continue on the back of new product launches in the premium category, operating leverage and better profits from subsidiaries. Premium valuations are justified, considering company's market leadership, its cash rich and debt free status, superior return ratios and high dividend payouts. We recommend BUY on the stock with revised target price of Rs 2,160. Financial Summary Consolidated Particulars, Rs cr EBITDA EBITDAM (%) APAT APATM (%) (Rs) ROE (%) P/E (x) FY17 FY18E FY19E 76 866.0 1,060.8 1,273.0 197.6 165.6 76.7 243.3 201.3 63.1 306.6 252.2 23.8 385.7 314.8 39.1 50.4 40.4
Q3FY18 Result Update Consumer Durables Symphony Ltd. P&L Account Quarterly Standalone Particulars, Rs cr Q3FY18 Q3FY17 YoY % Q2FY18 QoQ % Raw Material Consumed Stock Adjustment Purchase of Finished Goods Total Material Cost Gross Profit Employee Expenses A&P Expenses Other Expenses EBITDA EBITDAM (%) EBIT Other Income Interest PBT Tax Tax Rate (% on PBT) PAT PATM (%) 217.6 3.4 0.4 95.7 99.5 118.2 0.5 16.9 86.8 39.9 1.2 85.6 93.7 27.4 29.2 66.3 30.5 9.5 180.1 8.1 10.2 85.7 83.6 96.5 11.6 2.2 15.4 67.2 37.3 1.0 66.3 9.5 75.8 20.8 27.5 54.9 30.5 7.9 20.9 58.1 10 11.6 19.0 22.4 20.3 78.5 9.6 29.1 255bps 22.9 29.2 15.3 23.6 31.2 169bps 2 3bps 184.3 1.9 18.1 66.1 86.2 98.1 14.7 2.0 17.2 64.2 34.8 1.1 63.1 10.4 72.9 22.2 30.4 5 27.5 18.1 78.3 97.8 44.7 15.4 20.5 4.8 76.1 1.6 35.2 504bps 11.3 35.6 22.9 10 28.6 23.3 124bps 30.9 297bps 2 7.2 30.9
P&L Account Consolidated Particulars, Rs cr FY17 FY18E FY19E Growth (%) Material Expenses Employee Expenses A&P Expenses Other Operating Expenses EBIDTA EBIDTAM (%) EBIDTA Growth (%) EBIT Other Income Interest PBT Tax Minority Interest Share of Profit/(Loss) in Associated Company PAT PAT Growth (%) Growth (%) 76 72.4 364.4 68.7 4 92.9 197.6 45.3 190.5 43.2 233.7 68.1 165.6 39.9 51.3 866.0 12.8 400.1 75.3 43.3 10 243.3 235.4 50.9 285.5 84.2 201.3 1,060.8 22.5 484.8 91.2 53.0 125.2 306.6 26.0 8.5 29 60.5 357.8 105.5 252.2 25.3 25.3 1,273.0 2 575.4 108.2 57.3 146.4 385.7 25.8 9.1 376.6 70.6 446.5 131.7 314.8 Balance sheet Consolidated Particulars, Rs cr FY17 FY18E FY19E SOURCES OF FUNDS Share Capital Reserves Total Shareholders' Funds Minority Interest Long Term Debt Short Term Debt Total Debt Net Deferred Taxes Long Term Provisions & TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS Net Block CWIP Goodwill Investments LT Loans & Advances and Total NonCurrent Assets Inventories Trade Receivables Cash & Equivalents ST Loans & Advances and Other Current Assets Total Current Assets Trade Payables Other Current Liabilities & Provisions Total Current Liabilities Net current Assets TOTAL APPLICATION OF FUNDS 4 459.0 2.7 485.5 7 282.8 4.4 368.2 77.3 52.3 46.6 54.3 230.6 61.0 52.3 113.3 117.3 485.5 562.3 576.3 3.1 58 79.2 329.4 4.8 417.2 85.4 54.6 9 60.8 295.3 68.8 59.9 128.7 166.7 58 705.4 7 3.8 727.6 85.6 387.5 5.9 482.9 101.7 65.4 162.1 7 403.8 85.7 73.4 159.1 244.7 727.6 877.3 891.3 900.3 91.5 460.3 562.7 118.6 76.7 245.5 89.4 5 104.6 8 192.7 337.6 900.3
Cash Flow statement Consolidated Key Financial ratios Consolidated Particulars, Rs cr FY17 FY18E FY19E Particulars, Rs cr FY17 FY18E FY19E Reported PBT Nonoperating & EO items Interest Expenses Working Capital Change Tax Paid OPERATING CASH FLOW ( a ) Capex Free Cash Flow Investments Nonoperating income INVESTING CASH FLOW ( b ) Debt Issuance / (Repaid) Interest Expenses FCFE Share Capital Issuance Dividend FINANCING CASH FLOW ( c ) EO items NET CASH FLOW (a+b+c) Closing Cash 233.7 30.6 (34.9) 68.1 107.2 (1.9) 105.2 (120.6) 30.6 3.2 (88.7) () 12 7.0 (37.8) (2.0) (13.5) 5.0 46.6 285.5 35.9 (1.4) 84.2 172.7 (1) 162.7 (46.5) 35.9 (0.4) (21.1) () () 142.7 (84.0) 0.3 (103.7) 47.9 9 357.8 8.5 (10.4) 105.5 208.4 (15.0) 193.4 (58.2) (1.1) (31.6) () 192.7 (109.2) (109.2) 67.6 162.1 446.5 49.8 9.1 (9.5) 131.7 265.3 (15.0) 250.3 (72.7) 49.8 (1.2) (39.1) () 249.6 (142.8) 0.8 (142.7) 83.4 245.5 PROFITABILITY (%) GPM EBITDAM EBITM APATM RoE Core RoCE RoCE EFFICIENCY Tax Rate (%) Fixed Asset Turnover (x) Inventory (days) Debtors (days) Payables (days) Cash Conversion Cycle (days) Debt/Equity (x) Net Debt/Equity (x) PER SHARE DATA C BV Dividend VALUATION 52.6 73.7 47.8 29.1 4.0 36.8 24.9 29.0 32.6 (0.9) 65.6 53.8 27.2 95.2 44.6 4.2 23.0 29.0 3 (1.0) 29.9 82.3 1 54.3 23.8 115.6 46.0 4.8 35.0 22.5 2 (1.0) 37.3 102.8 13.0 P/E (x) P/BV (x) EV/EBITDA (x) Dividend Yield (%) 76.7 63.1 50.4 27.7 22.0 17.7 62.3 49.9 39.0 54.8 29.6 39.1 137.3 46.8 5.4 34.0 22.0 3 26.0 (1.1) 46.3 127.3 17.0 40.4 14.3 30.4 0.2 0.6 0.9
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