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Record performance; Outlook intact

Symphony Ltd, and its subsidiaries are engaged in manufacturing and trading of residential, commercial and industrial air coolers, both in domestic and international markets. Company operates through two segments: Air Coolers and Corporate Funds. It offers air coolers in various categories, such as residential, packaged and central air coolers.

* Consolidated revenue rose 36.1% YoY to a record high in Q4FY21, on the back of growth seen across all markets. Domestic sales (~51.3% of total sales) grew 27.9% YoY, while international sales rose 46.0%.

* EBITDA margin expanded 85bps YoY to 26.5% owing to lower staff cost and other operating expenses during the quarter. Resultantly, Adj. PAT also grew 40.9% YoY to a record quarterly level.

* We expect performance to improve further backed by increased demand for its products and expansion in market share. Hence, we maintain our rating on the stock to Accumulate with a revised TP of Rs. 1,382 based on 44x FY23E adj. EPS.

Highest quarterly sales and PAT in Q4FY21

Consolidated revenue grew 36.1% YoY to highest ever level of Rs. 339cr in Q4FY21, primarily helped by robust summer sales and positive trade sentiments. Company witnessed strong growth in both domestic and overseas markets. Domestic sales (51.3% of total sales) grew 27.9% YoY to Rs. 174cr, while sales in rest of the world recorded a 46.0% YoY growth during the quarter with strong topline growth for its Australian subsidiary, Climate Technology. EBITDA went up 40.6% YoY to Rs. 90cr aided by product mix and lower operational costs, with EBITDA margin improving 85bps to 26.5%. Resultantly, adjusted PAT also registered strong growth of 40.9% YoY, reaching all-time high of Rs. 62cr in Q4FY21.

Key concall highlights

* During Q4FY21, inventory levels continued to be normalized at the channel partners, thus avoiding an overstocking situation. Management expects lockdown to ease by May providing potential recovery.

* Management declared a total dividend of Rs. 5/share in FY21 (consisting of Rs. 1/share interim dividend and Rs. 4/share final dividend).

Overseas growth momentum continues despite Covid-19 impact

Company’s international operations continued to witness robust growth. Its Australian subsidiary, Climate Technologies’ posted strong growth in revenue in Q4FY21, while profitability remained impacted owing to higher input, freight and labour costs. China (GSK) revenue also increased sequentially. Meanwhile, sales in its Mexico (IMPCO) operations remained impacted due to Covid-19 and rising costs. Going forward, management expects steady growth in overseas operations.

Valuation

Symphony’s steady gains in market share and strong brand recognition in the domestic market should continue to support topline. The ongoing consolidation in the consumer durables appliances industry in terms of volumes from unorganized to the organized sector further benefits the company. With record quarter, normalization of inventory levels and rising collections, coupled with improving demand outlook for its products, we remain positive on the company’s long-term performance and maintain our rating on the stock to Accumulate with a revised TP of Rs. 1,382 based on 44x FY23E adj. EPS.

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