Buy Symphony Ltd for Target Rs. 741 by Sushil Finance Ltd
CATEGORY LEADERSHIP WITH PROVEN EARNINGS POWER AND HIGH OPERATING LEVERAGE
Symphony’s leadership is reflected not only in its estimated 50% share of the organised Indian air-cooler market, but also in its ability to command a premium. The company’s retail audit indicates an approximately 10% price premium over the number-two brand and a 43% share of voice, while gross margins remained resilient at 47.8% in FY24, 49.1% in FY25 and 47.4% in FY26 despite revenue volatility. With household aircooler penetration at only ~14% and nearly 70% of the market still unorganised, Symphony’s ~30,000-dealer network provides a long runway for formalisation-led growth. FY25 demonstrated the earnings potential of this franchise, with revenue increasing 36% to Rs. 1,576 crore, EBITDA reaching Rs. 301 crore at a 19.1% margin and free cash flow at Rs. 236 crore
FY26 was primarily a volume-led setback rather than a deterioration in the franchise. Revenue declined by Rs. 445 crore and gross profit by Rs. 238 crore, while operating costs reduced by only Rs. 49 crore, resulting in an Rs. 188 crore EBITDA decline. Consequently, approximately 42 paise of every rupee of lost revenue flowed through to EBITDA, highlighting the operating deleverage inherent in Symphony’s fixed-cost base. However, the same cost structure should provide meaningful operating leverage during a demand recovery, provided the company sustainsits pricing premium, brand strength and distribution leadership.
BISP (BEYOND INDIA SUMMER PRODUCTS) & PORTFOLIO DIVERSIFICATION TO REDUCE DEPENDENCY ON SEASONAL CLIMATE VARIATIONS
Symphony's earnings follow the weather, and a weak summer drove the FY26 decline. Management is cutting that exposure through BISP, its portfolio of adjacent comfort products such as water heaters, tower fans, kitchen fans and personal cooling fans. On a TTM basis at Q1 FY27, BISP revenue was Rs. 560 crore, or 48% of consolidated revenue (Rs. 179 crore, or 23%, on a standalone basis). A higher BISP mix means more of future earnings no longer hinges on a single summer
From the coming quarter, the company will also make a phased entry into room air conditioners, BLDC fans and air purifiers. Manufacturing stays outsourced, and product development, inventory, brand building, channel readiness and working capital will be funded from internal accruals. The move reuses Symphony's brand, distribution and after-sales network to widen its addressable market without debt or heavy fixed assets. Room ACs and BLDC fans are still summer-weighted, so they widen the market more than they smooth the year
OUTLOOK & VALUATION
We expect Symphony to deliver 61% growth in Revenues to Rs. 1825.5 crore in FY29E from Rs. 1130.4 crore in FY26. This growth is driven by their industry leadership and constant high roce. Furthermore, the company’s move towards lowering its dependency on Indian summers through BISP could help in stabilizing their revenue through the quarters instead of having highly concentrated revenue in just 1-2 quarters. We estimate the EBITDA and PAT margins to be 15% and 10.7% respectively by FY29E. Our estimated EPS is Rs. 18.8, Rs. 22.8 and Rs 28.5 for FY27E, FY28E and FY29E respectively. We assign a P/E multiple of 26x to arrive at the target price of Rs. 741, which is an upside of ~37% from its last closing price at Rs. 540. We initiate coverage on Symphony with a BUY rating, over an investment horizon of 24-30 months.
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