Symphony jumps after business update

Symphony surged 4.73% to Rs 825.25 after the company said it has witnessed a sudden spike in sales of aircoolers to high-end homes and of commercial coolers to offices, which bears well going forward.

In 2019 the company had taken several measures to scale up sales in the summer of 2020. But the pandemic hit India at the beginning of summer when consumers buy air-coolers. Up until the middle of March sales of air-coolers were very robust, but the countrywide lockdown in the second fortnight of March resulted in a loss of about 15%-17% of sales for the quarter that ended in March 2020. Despite the company having firm orders from both domestic and international customers, it was unable to deliver the goods towards the end of March, leading to several orders being cancelled.

Post easing of lockdown in May, sales by the channel has been very robust aided by soaring temperatures and a delayed summer. The company hopes that the channel inventory would be at acceptable levels by the end of summer.

The company's sales in the current quarter has been severely impacted and will be a fraction of what it ordinarily would have been. But if the channel inventory is down to normal levels by the end of the quarter, which appears quite likely, it is expected that collections from next quarter onwards should be back at normal levels.

It will remain to be seen how much of the collection the company is able to convert to sales during the July to September quarter, since the company's OEMs are facing production constraints because of labour shortages and logistic bottlenecks. The company expects production to normalize in the third quarter.

Meanwhile, the company has witnessed a sudden spike in sales to high-end homes and of commercial coolers to offices. This is because the government has advised the populace to be in well ventilated spaces rather than breathe in recirculated, air-conditioned air which may spread infections. Moreover, portable air-coolers are being preferred in the current times because they do not require installation like air-conditioners.

Despite the current setback, the company expects to bounce back very quickly on the strength of its asset-light and capital-light business model.

On the financial front, with very little sales in the first quarter, absolute sales and consequently profitability for the full year is likely to fall short of 2019-20 sales, though the margin percentages will remain intact. The full impact of the new models introduced in 2019 and all other initiatives will be evident from the first quarter of 2021-22.

In international business, the company's Mexican subsidiary has been largely unaffected by Covid19 so far,and it appears as if it will the end fiscal at a similar level as last year. GSK, the subsidiary in China, has been greatly affected by the US-China trade war, and the pandemic, but will still manage to end the year with sales and profitability like last year. The Australian subsidiary is likely to end the year with enhanced profitability due to various measures to reduce cost.

Symphony's consolidated net profit jumped 37.84% to Rs 51 crore on a 20% rise in net sales to Rs 288 crore in Q3 December 2019 over Q3 December 2018.

Symphony manufactures air coolers for domestic, commercial and industrial customers in 60 countries across the globe.

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