Peak time to buy this summer stock with 37% returns? Why this air cooler firm is best share bazaar bet - Analysis
Summer season is just around the corner. And, there is one stock which is best to buy in this season.
Summer season is just around the corner. And, there is one stock which is best to buy in this season, and it is none other than Symphony Limited which is the leading player in the evaporative air-cooling technology. It now stands to be the number one air-cooler manufacturer in the world. With ample variety and designs of air-coolers for residential, industrial and commercial sphere, the firm has carved a niche for itself.
The company, with its air-cooling technology, has also expanded and left its mark by acquiring companies in Mexico, China and Australia. It currently commands ~50% market share by value and upwards of 40% by volume in the organized domestic air-coolers market.
Pankaj Bobade, Research Analysts at Axis Securities said, " We initiate coverage with BUY rating and a target price of Rs. 1,680 i.e. 37% upside."
This why you should invest in Symphony, as per Axis Securities.
Air coolers- middle class household’s solace in summers.
Air coolers provide Natural or Evaporative Cooling and score over AC in terms of lower life-cycle cost and enhanced flexibility. Also, being low initial cost product compared to an AC, it is best suitable for hot, dry parts of the country. Running cost is also a fraction as there is no refrigerant to leak or compressor to burn out, the maintenance cost is also very low. The lower cost of ownership and constrained power supply situation in India, air coolers are in high demand in India.
Changing weather, global warming necessitates cooling solutions
The average global temperature has increased by about 1.4 degrees Fahrenheit (0.8 degrees Celsius) over the past 100 years, according to the National Oceanic and Atmospheric Administration (NOAA). Rising temperatures, coupled with heavy
urbanization and delayed and/or short monsoons, make summers unbearable calling for effective cooling solutions viz. air coolers which are within the reach of the general population. With rising mercury, the demand for air coolers rise especially in the hot dry parts of the country during the months of April, May and June before the rainy season arrives.
Technological innovations, under penetration to drive growth.
Technological innovations differentiates the products; air coolers with smart looks, feather-touch digital control panels, remotes, auto swings, alarms and other intelligent features are gaining popularity over the runoff-the-mill products from unorganized segment.
Focused player, asset light business model backed by strong brand
Symphony management has now directed all its focus on single product viz., air coolers. Today, Symphony is the largest air cooler company in India with ~50% market share of organized market in value terms and upwards of 40% in volume terms. ‘Symphony’ ranks amongst top trusted brands in air cooling segment and has become a generic name for air coolers. It outsources 100% of its production to around 9 OEMs, thus following an asset light business model. No wonder the company enjoys excellent capital efficiency, the return on capital employed (RoCE) has been 45% plus for last 10 years.
Centralized Air cooling- offers enormous prospects
With acquisition of IMPCO, Mexico in 2009, Symphony got foothold in the industrial cooling systems and entry into lucrative USA and Latin American market. Acquisition of M Keruilai Air Treatment Equipments (Guangdong), China (now known as GSK, China) was another step in the same direction.
Beating seasonality in the business by diversifying across borders
With acquisition of Climate Technologies Pte., Australia, Symphony has widened its international footprint sticking to its ‘one product, many markets’ moto. The Australian acquisition not only provides Symphony Ltd. access to new geographies viz., Australia and USA (one of the largest air cooling market is the world) but also an opportunity of moderating its business risks because of complimentary weather conditions prevailing in India and Australia along with the presence of Climate Technologies in both cooling as well as
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