Buy Symphony; target of Rs 1650: ICICI Direct

ICICI Direct's research report on Symphony

With the implementation of GST, product pricing differences between the unorganised and organised industry have shrunk. This would lead to demand shift towards organised players. The air cooler industry is still largely dominated by unorganised players, which constitute 72% in volume and 50% in value market shares. We believe consumer durable companies will also be key beneficiaries of an increase in the disposable rural income with the government’s target to double the rural income by 2022.Symphony being the largest air cooler company in India, commands 50% value market share of the organised category. We believe the company will be the biggest beneficiary of a shift in demand to the branded category. We expect Symphony to record consolidated revenue CAGR of 19%for FY17-19E.

We believe the air cooler industry will grow at 18% CAGR in FY16-28E due to demand remaining intact in tier-II and tier-III cities. Currently, the air cooler industry is largely dominated by the unorganised segment (72% volume market share). We believe a shift from the unbranded to branded category (due to rising aspiration level) opens up a huge opportunity for organised players to grow. We model sales, earnings CAGR of 19%, 12%, respectively, in FY17-19E, led by strong volume growth in the wake of better monsoon, higher disposable income & GST. We use DCF method for valuation, arriving at the target price of Rs. 1650.

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