Recommendation Review: Symphony

A company that has turned around from being admitted to the Board for Industrial and Financial Reconstruction (BIFR) to gaining a market share of over 50 per cent in the organised air cooler markets, Symphony has shown tremendous growth in the last few years. In fact, in the last five years, the company has seen around 49 per cent CAGR in its revenues.

Apart from having a strong domestic presence with a focus on rural and semi-urban areas, Symphony also exports its products to over 60 countries, with the US and Mexico being major markets. In 2008, it acquired Mexico-based Impco and not only increased its geographical footprint, but also brought to India the concept of using coolers for large industrial and commercial establishments.

Operating on an asset-light model with strong cash flows and zero debt, there is no doubt that the fundamentals of Symphony are strong. However, the stock has seen some downward movement since our recommendation in Dalal Street Investment Journal, Vol 28, Issue # 5 (dated February 24, 2013), when it was trading at Rs 352 per share. The lowest level it has seen since then has been Rs 320.

In the last few quarters, there has been pressure on the export volumes of Symphony following excess inventory at Impco. However, the situation has been getting better and is expected to turn to normal soon. In Q3FY13, the export volumes were lower by 77 per cent as compared to Q3FY12, while in Q4FY13, export volumes were lower by 26 per cent as compared to Q4FY12. Clearly, there has been an improvement in the volumes and stabilisation is expected soon. We recommend that investors continue holding this counter for long-term returns.