SYMPHONY - Symphony Limited Share Price

In the Q1 FY'26 earnings call, Symphony Limited's management provided a cautious outlook, primarily attributing the decline in revenue to a subdued summer marked by adverse weather conditions. The company's standalone revenue fell to Rs.229 crores from Rs.373 crores year-on-year, with Profit After Tax (PAT) dropping to Rs.37 crores from Rs.69 crores. However, management noted that this June's sales were the second-highest on record for the quarter, up by 10% compared to June 2022.

Notably, management highlighted that the company's revenue for the trailing twelve months reached Rs.1,038 crores, up from Rs.996 crores, resulting in a flat EBITDA of Rs.229 crores. Furthermore, the company reported a capital employed in the core business of negative Rs.30 crores, translating to a remarkable Return on Capital Employed (ROCE) of infinite and Return on Net Worth (RONW) of 18%.

The management also discussed the performance of specific segments, with air coolers impacted due to the mild summer. In contrast, adjacent categories such as tower fans and kitchen cooling products exhibited a 50%+ CAGR over the past few years, contributing about 25% to total sales.

On the forward-looking front, Symphony's management indicated plans to continue expanding into non-air cooler products, including water heaters, which will be rolled out gradually to a broader market over the next year. They emphasized a sustained focus on exports, aiming to leverage favorable tariff comparisons against competitors in China.

The company has also approved an interim dividend of Rs.1 per share. Despite current market challenges, management remains confident in their strategic initiatives to mitigate seasonality risks and enhance operational efficiency moving forward. The monetization of subsidiaries like IMPCO and Australian operations is projected toward late FY'26 or early FY'27, indicating interest from potential buyers.

1. Question: "I just wanted to know about the channel inventory and what kind of situation would be there over their end?"
   Answer: "Channel inventory is currently higher than what we typically expect at the end of a summer quarter. This is due to the aggressive inventory placement leading up to the subdued season. We are gathering more data on this, but it's safe to say the inventory levels are elevated."

2. Question: "On the adjacent category side - LSV, tower fans, and water heaters, what are the growth trends expected?"
   Answer: "These categories are showing over 50% CAGR and are integral to our growth. Even during this subdued season, they maintained strong growth. I anticipate that they will continue to grow at a faster pace than our residential coolers."

3. Question: "On the BLDC technology side, what is the adoption rate and how do we differentiate?"
   Answer: "Our BLDC products, priced at a 10%-15% premium, have seen mixed adoption; the tower fans are doing better than coolers. Our profitability stands in contrast to competitors who report losses, which illustrates our emphasis on sustainable growth."

4. Question: "Are we focusing on scaling up exports, especially to the US?"
   Answer: "US tariffs are evolving, and currently, Indian tariffs are lower than those on Chinese products. Our immediate focus is on maintaining sales for upcoming summers; future tariffs will not dictate our strategy."

5. Question: "How do you see channel inventory normalizing?"
   Answer: "Channel inventory will normalize as tertiary sales begin closer to next summer. Once sales resume, we expect to see a return to typical levels, but until then, inventory levels remain high."

6. Question: "How much of the revenue decline can be attributed to weather versus structural factors?"
   Answer: "The decline is entirely due to the weak summer; this has affected everyone in our category. We're seeing no structural issues within our business model."

7. Question: "What are the region-wise demand trends?"
   Answer: "The southern region faced the worst decline this summer, but overall, the downturn was consistent across the country. We're seeing uniformity in demand reduction."

8. Question: "Have we seen any early recovery post-June?"
   Answer: "Sales will taper this quarter as it's monsoon season, and with high channel inventories, we're not expecting robust sales. It's primarily a waiting game until next summer."

9. Question: "What are the updates on the monetization of IMPCO and Australia subsidiaries?"
   Answer: "Interest has been strong from potential buyers, but we are still early in the process. I anticipate we might see progress towards the end of this financial year or early next year."

10. Question: "What's the realization and margin profile for adjacent categories?"
    Answer: "Margins vary; some products have higher margins, while others are lower but overall show a positive mix. Particularly, LSV categories are significantly better on margins."