Symphony – is it a Good Buy?

Symphony is an Indian Multi-National Company, has presence in over 60 countries and is the world’s largest manufacturer of air-coolers.

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(A) About the Company

Specializes in manufacturing air coolers

Found in 1988, in Gujarat, India, Symphony established a new category of evaporative air-cooling in India, taking it to the globe. As a disruptor of a highly unorganized sector, the company has set high benchmarks comprising 201 trademarks, 64 registered designs, 15 copyrights and 48 patents, defining the gold standard of air cooling.

Symphony markets its products in more than 60 countries, making it possibly the most widely available air-cooling brand in the world. These countries include Australia, China, Mexico, USA, UK, UAE, Brazil, Saudi Arabia, Spain and almost all African and South-East Asian countries.

Symphony Limited was awarded the Guinness World Record for creating the world’s largest functioning air coolers. The company also provides solutions through its world’s largest air cooling project In Mecca-Madina at Hajj Camp and India’s largest air cooling project at Patanjali Yoga Bhavan, Haridwar, India.

Symphony Ltd - History

Mr Achal Bakeri, son of a Property Developer, started the business of air coolers in 1988 by borrowing the seed money from his family. The Company got listed on Stock Exchange in 1994. Between 1995 and 2000 the Company diversified into Air Conditioners, washing machines, and other durables. Unfortunately the strategy of "Many products-One market" did not suit the Company. It went into Financial Stress and Restructuring.

The Company stood the test of time by changing its strategy.

From a single market, multiple products company, Symphony Limited evolved into a single product company with multiple markets. It Acquired IMPCO (North America) during 2009-2011. In 2016 acquired Keruilai in China and Climate Technologies Pty Ltd (Australia).

At present, Symphony is world’s largest manufacturer of air coolers with a presence in over 60 countries.

(B) Shareholding Pattern of Symphony Ltd

symphony stock research with detail of shareholding pattern
symphony stock research with detail of major shareholders

(C) Executive Board Members of Symphony Ltd

(i) Mr. Achal Bakeri - Chairman and Managing Director (Founder)

Mr. Achal Bakeri is the founder of the world’s largest air coolers company. In 1988, he founded Symphony Limited with the aim of providing economically viable cooling solutions that would be accessible to all. He has infused respectability and aesthetics into air coolers through an innovative approach. He is 61 years old and has two daughters. One of the daughters, Ms. Jonaki Bakeri is on the Board of Directors of the Company.

He did his degree in Architecture from CEPT University Ahmedabad and Masters of Business Administration from University of Southern California.

Mr. Achal Bakeri waived his rights to receive remuneration / commission for the year 2020-21 due to COVID - 19 pandemic.

(ii) Mr. Nrupesh Shah - Executive Director

Mr. Nrupesh Shah heads the company’s Corporate Affairs functions. He is responsible for corporate affairs, growth, performance, strategies, merger & acquisitions, finance, M.I.S., secretarial, legal, treasury etc. Mr Nrupesh Shah has been with the Company since 1993 and played a key role in turnaround of the Company and putting on growth trajectory.

He did his Bachelors of Commerce and is a Chartered Accountant and Company Secretary by qualification.

Mr. Nrupesh Shah INR 108.05 Lakh remuneration during the FY 2020-21, i.e. 0.12% on Net Sales and 1.01% of Net Profit of the Company for the year.

(iii) Ms. Jonaki Bakeri - Non-Executive Director

She has an experience in various business functions including sales and marketing, accounts and finance, legal and product development

(vii) Mr. Amit Kumar - CEO and Additional Director

Mr. Amit Kumar was appointed as CEO and Additional Director of the Company with effective 2nd August, 2021. With over 18 years of experience, Mr Amit Kumar was associated with GE, PwC, Shapoorji Pallonji , EY and KPMG.

(D) Domestic Air Cooler Industry

segments of domestic air cooler industry

The domestic air cooler industry size is about 8 mn units in terms of volume and ~Rs 4000 crore in terms of value. The industry is dominated by unorganised industry while value market share of organised market share is mere 25%.

Symphony commands ~50% market share in the organised category in FY 2020-21. Highest in the Organized sector

Air-coolers have emerged as one of the fastest growing segments within the consumer appliances space. They are energy-saving, moderate in power consumption, are eco-friendly and can cool effectively.

The air cooler industry market in India, is expected to reach Rs. 9,000 crore in the next few years following increased
incomes and temperatures, widened market presence, increased aspirations and a cost advantage over air-conditioners.
The air cooler segment can be categorized into residential and industrial segments.

Although unorganised segment players are sustaining the position of dominant players in the air cooler market, branded coolers are penetrating deeper following the introduction of GST, which reduced the cost gap between the two, favouring organised players.

(E) Group Structure of Symphony Limited

stock research update of symphony ltd with details of its foreign subsidiary

Symphony Limited has Global Subsidiaries in five countries, namely, Mexico, china, Australia, USA and Brazil. It acquired IMPCO in 2009 facilitating a ready-made market access to North America.

Symphony acquired Guangdong Symphony Keruilai Air Coolers (GSK), China, in 2016, a company that had in the past helped frame China’s air-cooling quality standards and had been awarded 50 patents for industrial coolers.

The company completed the acquisition of Climate Technologies (CT) in 2018.

Bonaire USA (BUSA), a subsidiary of Climate Technologies, is a step-down subsidiary of Symphony. BUSA produces air coolers and markets to Home Depot, Lowe’s and Amazon.

Symphony Climatizadores Limitada (SCL), Brazil, established as a 100% subsidiary of Symphony India to address the Brazilian market.

(F) Range of Products

symphony stock performance
Symphony Ltd. - Range of Products

Symphony Ltd is the largest air cooler manufacturer in the world. 97% of the revenue of Symphony Ltd comes from the sale of Air coolers. Symphony Ltd provides air cooling products in the residential, industrial and commercial segments.

The Company has a Network of 30,000+ retailers and 1000+ distributors.

symphony stock research update

(i) Household Air Coolers

Symphony Ltd provides Variety of Desert, Room & Personal Coolers. Cooling area range is from 12 M² to 50 M². Symphony Air coolers have aesthetically appealing designs

(ii) Industrial and Commercial Coolers

Symphony Ltd entered into the Industrial Air Cooler segment in 2009 and Commercial Air Cooler Segment in 2014-15 by gaining the technology through IMPCO, Mexico and GSK, China respectively.

Industrial air coolers are ideal for spaces like factories, warehouses, showrooms, workshops, religious places and other areas with large open spaces that are difficult and commercially unviable to air conditioning.

Symphony launched specially designed accessories like duct, stand, controller, etc. for the range of industrial coolers for providing end-to-end solutions to the customers. This proactive move made Symphony a one stop shop for industrial cooler customers. The Company did a virtual launch event for Industrial Cooler Accessories where channel partners from all over India joined.

Like the latest Industrial Cooler models, Symphony outsources the accessories also in India. This makes Symphony more competitive because of the lower cost and reduced lead time compared to the option of importing such coolers from its subsidiary companies in China and Mexico. This is also in line with the Make in India initiative launched by Government of India.

New client additions for their industrial cooling segments include big names such as Big Basket, Delhivery and Hawkins.

(G) Portfolio of Global Brands - Symphony Ltd

symphony ltd brands foreign
Portfolio of Global Brands

(H) Business Model of Symphony Ltd

business model of symphony

Symphony is associated with 11 OEMs. The Company’s operations comprise no investments in manufacturing facilities in its Indian operations and a phased decline in its global subsidiaries. Symphony has outsourced manufacturing base in Indian operations.

(I) Revenue Segmentation

symphony stock research with details of revenue segments in last 10 years
symphony stock research with details of geographical segmentation FY21

Symphony Ltd. has only one major Segment - Air Coolers all over the world. The Company has direct business presence in four continents and markets products across more than 60 countries. These countries include Australia, China, Mexico, USA, UK, UAE, Brazil, Saudi Arabia, Spain and almost all African and South-East Asian countries.

The Company continues to have several international quality certifications like CE, SASO, NOM etc., which provide access to market in several countries. The Company sells ducted gas heater in Australia, which is also the main factor for revenue improvement in the FY 2020-21.

It has a global presence and generates revenue from USA, Australia, Mexico etc., along with India.

symphony stock research with details of revenue breakup segment wise

(J) Operational and Other key Parameters to see in Symphony

Advertisement Expense as % of Sale

symphony stock research with details of advertisement cost in last 10 years

The Company continued its advertisements even during the lockdown period to protect its share of mind and market share.

In order to maintain brand dominance and increase customer pull, Symphony launched two new campaigns, one for Household Coolers and another for the Movicool Range of Commercial Coolers. Symphony adopted a 360-degree approach by executing the campaigns through various ATL media like TV, Print, Radio, Internet, etc. and BTL initiatives like In-Shop Branding, Brand Promoters, Activations, etc.

(i) Raw Material Expense as % of Sale

symphony stock research with details of raw material cost in last 10 years

Raw material prices (especially plastic & Steel) increased substantially in Q3FY21, however, the management took price increase w.e.f 1 January 2021, thus passing on the price hike to customers.

(ii) Fixed Assets as a % of Total Assets

symphony stock research with details of fixed assets in last 10 years

In India Symphony has outsourced manufacturing base thus has an asset-light business model.

(iii) Free Cash Flows

symphony stock research with details of free cash flow in last 10 years

(K) Financial Parameters - Symphony Ltd.

symphony stock research with details of financial performance in last 10 years
  • Net Sales grew at a normal rate over the past 10 FYs.
  • During the year FY21, there was a decline in sales compared to the previous year due to the prevalence of COVID - 19
    pandemic. This led to large unsold inventory in most countries as there were no sales during the summer months because of local lockdowns. The maximum impact of the decline was observed in the first three quarters.
  • Recovery started from the fourth quarter. Sales in the regions of Middle East, Africa, and Europe were more or less at the previous year’s levels.
  • Net profit grew at a lower pace. PAT fell by 52% in FY19. Symphony's PAT margin. The year marked by weaker consumer sentiment effected heavily to company like Symphony that is driven by consumer pull.
  • There is no expansion in PAT margin, operating profit margin, ROE and ROCE in last 3 years.

Symphony Ltd - Dividend Payout Ratio

The company has been maintaining a healthy dividend payout.

(L) Management Discussion and Concall Highlights (FY21)

(a) With a view to improve EBITDA growth in FY22, key project initiatives have been planned including outsourcing of the fabrication requirement of the high volume ducted gas heater range to India;

(b) The management expects its Australian subsidiary Climate Technologies Pvt Ltd to witness a massive turnaround in FY22 and increase its contribution to topline. The management plans to introduce a new range of small commercial air coolers in the Australian market

(c) Exports are expected to increase and the management believes the contribution of the exports from India (except foreign operations) would be more than Rs 100 crores in FY22. Expanding the Symphony India air cooler product offering in the USA.

(f) Outsourcing ducted evaporative air cooler kits supply to India. Part of the sourcing that used to happen from Australia and China for CT will instead be sourced from suppliers based in India from FY22 onwards.

(g) Delay in passing on of sharp increase in input costs (raw material cost, logistics cost) has resulted in lower gross margin in Q4FY21 for standalone business. However, the company would pass on inflationary pressure in coming quarters and thereby aims to maintain annual gross margin

(h) The company launched Duet 3D, Sumo, Hi-Flo and Duet I-s in their commercial air cooler and cooling fan segment for the Indian market. Launched a wide range of accessories in the industrial air coolers segment. Also, launched a wide variety of products for subsidiaries in Australia, the US, China and Mexico.

(i) Due to the unexpected bankruptcy of FAMSA, a major appliances and furniture retailer in Mexico and also one of IMPCO’s top customers, the Company had to write off a debt of $21.9 mn. MXP (INR 7.16 Crores). This affected the profitability for the year.

(M) Management Outlook

Owing to enhanced rural electrification, increasing urbanization, and the impact of global warming, the Indian air cooler market is anticipated to report attractive growth.

The residential sector will continue to be a dominant buyer in the Indian air cooler market due to the larger portion of the country’s population belonging to the lower and middle-income bracket and the rapid implementation of urban and rural housing projects by the government.

The industrial and commercial segments are anticipated to see demand growth as various players implement cooling solutions.

(N) Positive Outlook

1) Strong growth aided by overseas subsidiaries
Consolidated Revenues grew 36% yoy as demand improved post easing of lockdown. Stocking up by channels ahead of the upcoming summer season and market share gains from unorganised players are expected to drive growth in the near term. Further, the management expects steady and profitable growth in international operations in the near to medium term.

2) Indian appliances and consumer electronic industry

The Indian electrical appliances market reached Rs. 76,400 crore (US$10.93 billion) in 2019 and is expected to double to reach Rs. 1.48 Lakh crore (US$21.18 billion) by 2025.

Industrial air-cooling market is worth ~Rs 10,000 crore and Symphony being the only branded player in this segment stands to take advantage of it. Also, it is a strong Global brand.

3) Indian Air cooler markets

Air-coolers have emerged as one of the fastest-growing segments within the consumer appliances space. They are energy-saving, moderate in power consumption, are eco-friendly, and can cool effectively.

4) Symphony - Focus on Single Product & Innovation

Symphony has launched more than 30 models in the last two years and recently launched innovative models exclusively to be sold on e-commerce platforms. Further, the e-commerce business has almost doubled yoy, albeit on a small base.

Symphony is focusing on expanding its dealer network in semi-urban and rural areas.

(O) Risks/ Concerns

a) Symphony enjoys an international footprint across 60 countries, moderating its risk in the event of one or few geographies encountering a slowdown. Company is enhancing its footprint year by year in the domestic market.
Still, there seems to be a long runway.

b) Increase in Debtors Turnover in FY 2020-21 due to :
i) Decrease in sales in current year by 32% due to nation wide lockdown on account of COVID-19 during first two month of FY2020-21 which is company’s main season which has spill over effect in subsequent quarters.
ii) 35% Increase in trade receivables.

c) Plastic and steel prices impact the cost of raw materials of the company thus impacting the margins.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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