Mathews India Fund Stock Pick Symphony Ltd Surges & Its’ Not Too Late To Join The Party

Symphony reported excellent results in Q3FY14. For the December 2013 Quarter, the standalone sales turnover surged to Rs 119.26 crore and the net profit surged to Rs 24.79 crore as compared to a standalone sales turnover of Rs 92.12 crore and net profit of Rs 16.73 crore for the December 2012 Quarter.

The stock price has kept pace with a 42% YOY return. In just the last month, the stock price has surged 26%.

This surge in Symphony’s stock price has brought a smile to Sharat Shroff and Sunil Asnani, fund managers of Matthews India Fund, which holds 11,73,560 shares (3.36%) of Symphony, worth Rs. 58.67 crore.

Matthews India Fund has a number of other winning stocks in its’ portfolio such as AIA Engineering, Gujarat Pipavav Port, Sun Pharmaceutical, Bajaj Corp, Supreme Industries, MindTree etc (see the full portfolio given below).

Nrupesh Shah, ED-Corporate Affairs of Symphony, candidly stated that the emphasis of exports coupled with the rupee depreciation, new models and price increase had pushed operating profit margin and net profit margin higher by couple of points. He was confident that the Company would be able to maintain the margins at that level even in the quarters to come.

Nrupesh Shah also stated that while the air coolers market is a fiercely competitive industry with well recognized names such as Videocon, KenStar, Bajaj Electrical & Orient Fan, Symphony was able to hold its ground because of product innovation, continuous upgradation of the model and total focus on air cooler industry. He added that Symphony was in a position to charge premium pricing as it offered much better value for money to the customers.

Meanwhile Motilal Oswal has recommended a strong buy on Symphony, promising a price target of Rs. 650, a 33% upside from the CMP. Motilal Oswal has stated that it expects Symphony to record 25 percent revenue CAGR and 30 percent PAT CAGR over FY14-16E and that the margins are likely to improve to 24.5 percent in FY16E as against 22.5 percent in FY14E. It added that Symphony’s market leadership coupled with strong growth prospects for the industry and healthy financial metrics (debt free; 40 percent+ RoCE) are reasons why the stock should be bought.

Portfolio of Mathews India Fund As Of 31.12.2013