We recently added Symphony to our model portfolio . Here is my complete analysis and reasoning for adding it to model portfolio

Symphony Limited manufactures and sells consumer durable products in India. It’s name synonymous to Air coolers in India.

Business

Symphony Limited manufactures and sells consumer durable products in India. The company provides domestic, commercial, and industrial air coolers across various models under the Symphony name. It offers desert, tower, room, and personal coolers for residences, shops, showrooms and offices; heavy duty industrial air coolers for factories, offices, schools, malls, assembly halls, warehouses, and metro stations. The company also provides storage and instant water heaters under the Sauna name. Symphony develops its own models, designs and prototypes of air coolers before giving it to OEM’s for large scale manufacturing. In addition, Symphony Limited holds intellectual property comprising 8 patents, 49 designs, 108 trademarks, and 7 copyrights. The company also exports its products to approximately 60 countries. It offers its products through a network of approximately 750 distributors and approximately 15,000 dealers across India.

Positives

–          Well positioned to encash the growth

–          Leading player in the air coolers market

–          Huge product portfolio with innovative products

–          Strong dealer distribution network

–          Exports to boost sales

Risks

–          Takeover of Impco is yet not fruitful

–          High Inventory build-up in off peak season

–          Dependence on weather for sales

Financial health check

Quality indicators

Financial numbers reported by company exhibit

– Low or No chance for Bankruptcy

– Stable financial health

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Valuing the stocks using different models

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Key takeaways

If we look at cash basis valuation of the company it is available at 10% discount to market price

If we look at sustained earnings perspective the stock is available at 30% discount to market price

However if we take past earnings as basis, the stock seems to very expensive. Therefore this stock is not correct for defensive investors.

Investors who are willing to pay for future growth are likely to put small portion of their portfolio on this.

If the company doesn’t maintain high growth rates there is a high probability that stock price will start going south. We bought with 6-12 month perspective. With a review after 12 months.

Some numbers for crunchers

– Current growth rate of company based on ROE and Dividends – 37.5%

– Sales have been growing at CAGR of 25.5%

– Profit growing at 10%

–  FCF growing at 38%

– Average stock returns of close to 300% in last 5 years

Thanks for feedback on report. I have updated it with some commentary it is available for download Symphony_Analysis

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