Sell Symphony, target Rs 1,475: Anand Rathi
Anand Rathi has a sell call on Symphony with a target price of Rs 1,475.
The current market price of Symphony is Rs 1,838.05.
Time period given by the brokerage is one year when Symphony price can reach the defined target.
Investment rationale by Anand Rathi
Launches drive revenues: With dealers re-stocking inventory before the season Symphony reported strong (20.9 per cent y/y) volume growth in Q3 FY18, leading to revenue of `2.17bn. It launched six models in two new categories or ranges (Silverand Diamond) during Q3, which have been well accepted by markets. Its domestic revenue in 9M FY18 jumped 13 per cent y/y to Rs 4.98bn, but due to unfavourable economic conditions in West Asia led to its export revenue decliningto nearly Rs 0.96bn and “other geographic issues”.
Strong balance sheet: With its established brand image, asset-light model and zero debt, Symphony enjoys superior return ratios (RoE and RoCE at respectively 43 per cent and 34 per cent) with high dividend payouts(nearly 50 per cent). Cash and equivalents were nearly Rs 4.5bn at end-Q3 FY18.
Growth momentum to endure: With the new premium models well accepted in the market and mounting demand, Symphony’s prospects are bright.Also, its strong distribution network to penetrate rural markets will lead to robust growth. We expect its revenue and PAT to register CAGRs of 19 per cent and 21 per cent respectively over FY17-20.
Valuation: While we like Symphony for its leading position in air coolers and the best return ratios of its peers, we recommend a Sell on the stock due to the pricy valuation. Our new price target is Rs 1,475 (35x FY20e P/E).
Risks: Upswing in industrial demand, uneven summers.
The current market price of Symphony is Rs 1,838.05.
Time period given by the brokerage is one year when Symphony price can reach the defined target.
Investment rationale by Anand Rathi
Launches drive revenues: With dealers re-stocking inventory before the season Symphony reported strong (20.9 per cent y/y) volume growth in Q3 FY18, leading to revenue of `2.17bn. It launched six models in two new categories or ranges (Silverand Diamond) during Q3, which have been well accepted by markets. Its domestic revenue in 9M FY18 jumped 13 per cent y/y to Rs 4.98bn, but due to unfavourable economic conditions in West Asia led to its export revenue decliningto nearly Rs 0.96bn and “other geographic issues”.
Strong balance sheet: With its established brand image, asset-light model and zero debt, Symphony enjoys superior return ratios (RoE and RoCE at respectively 43 per cent and 34 per cent) with high dividend payouts(nearly 50 per cent). Cash and equivalents were nearly Rs 4.5bn at end-Q3 FY18.
Growth momentum to endure: With the new premium models well accepted in the market and mounting demand, Symphony’s prospects are bright.Also, its strong distribution network to penetrate rural markets will lead to robust growth. We expect its revenue and PAT to register CAGRs of 19 per cent and 21 per cent respectively over FY17-20.
Valuation: While we like Symphony for its leading position in air coolers and the best return ratios of its peers, we recommend a Sell on the stock due to the pricy valuation. Our new price target is Rs 1,475 (35x FY20e P/E).
Risks: Upswing in industrial demand, uneven summers.
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