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Strong performance amid challenging conditions…

Symphony’s Q4 performance witnessed a sharp business recovery on the domestic as well as international front. Consolidated revenues were up 36% YoY (~57% QoQ) to | 339 crore led by 38% and 35% YoY growth in revenue of domestic and international business, respectively. Improvement in business sentiments and a sharp rise in export revenues helped drive standalone business. The export revenue of the domestic business almost doubled to | 38 crore YoY in Q4FY21. On the international front, Climate Technologies (CT) reported a strong performance in Q4FY21 led by revenue growth of 84% YoY.

The Australian subsidiary, CT, has outsourced ~| 21 crore worth of air coolers from Symphony India for its major clients in the US as it has shifted its sourcing from China to India. The company believes further improvement in the performance of CT on ease of supply concerns. On the margin front, the consolidated Q4FY21 EBITDA margin increased 751 bps YoY (950 bps QoQ) to ~ 25% supported by turnaround of Australian business and higher operating leverage of domestic business. PAT came in at | 63 crore, up 58% YoY, mainly tracking strong sales and EBITDA margin during Q4FY21.

Sporadic lockdowns may delay domestic recovery

We believe extended lockdowns to curb the second wave of Covid-19 can impact peak season sales, thereby impacting domestic revenue in FY22E. However, on a consolidated basis. streamlining of supplies and improved demand conditions in overseas markets would partially negate the impact. Hence, we see a limited impact on consolidated revenues for FY22E. We model revenue CAGR of 11% in FY20-23E supported by ~10% and ~12% revenue CAGR of standalone and subsidiaries business, respectively.

Overseas business to support future sales growth

The overseas business contribution to sales has increased significantly from 38% in FY18 to 46% in FY21 led by strong performance of Australian subsidiary CT. Despite supply related concerns, a strong sales recovery in Q4FY21 led to 21% annual sales growth for CT in FY21. We believe ease in supply concerns along with increased export to United States would further propel sales growth of CT. We build in overall subsidiary sales to grow at a CAGR of 12% FY20-23E led by a strong 21% revenue CAGR for CT.

Valuation & Outlook

While we continue to like Symphony for its market leadership position in air cooler industry & asset light working model, the extended lockdowns in peak season would delay future sales recovery of domestic business. We maintain our HOLD rating on the stock with a revised target price of | 1345 (valuing 34x FY23E EPS, earlier TP | 1090/share) while we continue to monitor the impact of lockdown on domestic demand growth.

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