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Symphony reported mixed set of performance with Revenue largely coming in line with the expectations, while margin missing the estimates. Domestic business has seen decline on back of erratic weather resulted in demand slowdown. Gross margins have seen expansion on back of price hikes, value engineering and softening of commodity prices, however higher gross margin has not translated into EBITDA as certain costs like rental and travelling costs have seen increased and there is forex loss of Rs30mn. The company is seeing strong off-season collection and is expecting growth in domestic as well as international geographies in FY24 despite subdued Q1. SYML has gained ~300bps market share in the domestic business taking its share to 53%. Entry into adjacent product categories of tower fans will give further fillip to the revenue growth. Management has strategy in place to turnaround its international subsidiaries and improve its performance in next few years. We currently maintain our ADD rating on the stock with revised PT of Rs1,029 considering improved performance of subsidiaries and likely growth in domestic market despite weak Q1. We continue to value the company at 40x on FY25 earnings.

We now expect some recovery in domestic air-cooling market after Q1 being impacted by erratic weather conditions in various part of the country. International business is on improvement path with Mexico seeing strong performance and US sales should see strong bounce back given the stockout on back of harsh summer. We now expect FY23-25E growth trajectory of 11% revenue CAGR and EBITDA margin estimates of 15.6% and 16.7% for FY24 and FY25 and continue to maintain ADD with the PT of Rs1,029 valuing it at 40x.

Result Highlights

* Revenue – Domestic air-cooler segment registered decline of 14% yoy on weak demand which was impacted by erratic weather. Rest of the world saw flattish growth with Mexico subsidiary registering best quarterly revenue.

* Margin – Gross margin on consolidated basis has been 49.7% expanding by 408bps YoY Margin expansion was aided by price hike, value engineering and softening of input costs. EBITDA margin contracted by 170bps despite sharp improvement in gross margins on higher A&P Spends and negative operating leverage.

* Other highlights – International subsidiaries saw better performance with Mexico subsidiary registering highest quarterly Revenue and EBITDA, GSK China seeing turnaround, while CT Australia performance has been subdued.

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