New Product Launches And Synchronized Subsidiaries Will Optimize Future Operations

Key Takeaways

• Anticipated revenue growth due to delayed sales and introduction of new air cooler models could improve margins and drive performance.
  
• Strategic international subsidiary operations and credit risk mitigation aim to optimize supply chains and enhance financial health.
  
• Revenue and earnings are pressured by doubtful debt provisions, currency volatility, lack of industrial cooling traction, and challenges in new market ventures.

Catalysts

Manufactures and trades in residential, commercial, and industrial air coolers and other appliances in India and internationally.

• Symphony is anticipating a robust performance in the upcoming quarter due to spillover effects from delayed sales. New models that were not completed in time for the previous quarter are expected to drive revenue growth in the subsequent quarter.
  
• The introduction of 17 new air cooler models is expected to be margin accretive, which could result in improved net margins once these models are fully launched and contributing to sales.
  
• Symphony's recent water heater launch, equipped with AI features, has received positive feedback. Continued investment in this product line could boost future revenue streams.
  
• Strategic focus on international subsidiaries, such as leveraging GSK China to supply other markets and synchronizing operations, is anticipated to optimize supply chain efficiencies and improve consolidated earnings.
  
• Symphony has initiated stringent credit risk mitigation measures and implemented credit insurance policies post their recent experience with doubtful debt, which is expected to enhance future financial health and preserve net margins.

Symphony Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Symphony's revenue will grow by 14.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.8% today to 17.4% in 3 years time.
• Analysts expect earnings to reach ₹3.7 billion (and earnings per share of ₹48.34) by about February 2028, up from ₹1.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 48.5x on those 2028 earnings, up from 46.7x today. This future PE is greater than the current PE for the IN Consumer Durables industry at 47.0x.
• Analysts expect the number of shares outstanding to grow by 5.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.2%, as per the Simply Wall St company report.

Symphony Future Earnings Per Share Growth

Risks

• The company's revenue and earnings are impacted by a provision of ₹46 crores for doubtful debt, highlighting risks in credit control and customer payment reliability.
  
• Forex losses have negatively affected earnings, with ₹3.8 crores on a standalone basis and ₹9 crores on a consolidated basis, indicating exposure to currency volatility.
  
• The industrial cooling segment has not gained expected traction, showing an inability to scale and generate additional revenue streams.
  
• The company's subsidiary, Climate Technology Australia, is still undergoing transformation and has not yet delivered significant financial improvement, posing risks to consolidated earnings.
  
• Execution risks exist in the water heater segment, a new venture where market entry barriers and entrenched competition could impact future revenue and profitability.

Valuation

• The analysts have a consensus price target of ₹1481.125 for Symphony based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1839.0, and the most bearish reporting a price target of just ₹1100.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹21.1 billion, earnings will come to ₹3.7 billion, and it would be trading on a PE ratio of 48.5x, assuming you use a discount rate of 15.2%.
  
• Given the current share price of ₹1239.55, the analyst price target of ₹1481.12 is 16.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.