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Result Synopsis

Symphony reported disappointing set of performance with Revenue/EBITDA/PAT missing estimates by 16%/68%/80%. Domestic business continues to see increased positive traction with 22% revenue growth, however margins were lower on account of higher A&P spends. Company’s international revenue declined 54% yoy. Decline was significantly higher than anticipated with poor performance of Australian subsidiary Climate technologies. Management expects sharp revenues decline for climate technologies in FY24 as their main customer Home Depot is de?stocking on account of anticipated recession in US resulting in lower ordering. Gross margins at 41.2% was lower sequentially and yoy basis on account of change in product mix. EBITDA margin contracted 1389bps yoy negative operating leverage owing to steep decline in international revenue. Domestic business should see some moderation in growth momentum given the erratic weather condition in various part of the country. Management has taken corrective actions to improve the performance of its international subsidiaries which it feels should culminate in improved performance in medium to long term. Considering higher than expected decline in international business with full recovery to take longer than expected coupled with some erratic weather in domestic market resulting in some uncertainty, we downgrade the stock to ADD with PT of Rs1,064.

We now expect some uncertainty in domestic air?cooling market with erratic weather conditions in various part of the country and recovery in the international business to be gradual. We now expect FY23?25E growth trajectory of 12% revenue CAGR. We have lowered our EBITDA margin estimates by 200bps for FY24 and FY25 considering negative operating leverage. we downgrade the stock to ADD with the PT of Rs1,064 valuing it at 40x.

Result Highlights

* Revenue – Domestic air?cooler segment continued its strong growth of 23% yoy on strong demand for air?coolers ahead to summer season. Rest of the world saw sharp decline on lower demand from Australia and US geographies on anticipated recession.
* Margin – Gross margin on standalone basis has been 48.9% improvement of 600bps YoY as company has taken price increase and commodity process have stabilized. EBITDA margin has improved by just 80bps despite sharp improvement in gross margins on higher A&P Spends.
* USA Sales – US sales were lower as Curtailment of orders by large retailers in the USA and Australia. The company expects this phenomenon to be one time and sales should improve with rising temperature.

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