This stock gave 11,000 times return in 20 years!

The company incorporated in 1988 tasted phenomenal success in its first innings, but faced near bankruptcy in 2002. In its second innings, it learnt from its mistakes, won back customer and investor confidence.

By Mudit Kapoor  
Thursday, June 28, 2018

The three decade long business life of Symphony Ltd, is a fascinating journey. The company incorporated in 1988 tasted phenomenal success in its first innings, but faced near bankruptcy in 2002. In its second innings, it learnt from its mistakes, won back customer and investor confidence, and emerged as India's largest air-cooler manufacturer with market capitalisation of over Rs 10,062.96 crore.

Symphony has presence in 60 countries. Fuelled by recent acquisition of Climate Technologies, Australia's leading manufacturer of cooling and heating appliances, Symphony now has access to 50 per cent organized market share access to Australian and American markets through the acquisition. Further the opposite seasonal cycle of Australia and India is likely to ensure a stable demand of Symphony's products maintaining the revenue flow.

The stock of this firm was valued at Rs 0.13 on 1 Jan 1998, its all time low price. After 20 years, the current price of the stock is Rs 1,431 giving a return of 11,007 times in 20 years.

Symphony is the largest air cooler company in India with 50% market share in the organized market. It commands 10-12% pricing premium over competitors and sells its products on advance payment, a proof of its strong brand value.

Stock price growth chart of Symphony since 2003:

Symphony logged strong financial performance in the last decade signalled by its improved performance year-on-year.

Gross sales of symphony on an average have grown by 35 per cent throughout the last decade. In FY17, gross sales rose by a massive 61 per cent which resulted in increased profit of 41 per cent. The profit after tax on an average has risen by 95 per cent year-on-year.

Zero debt reinforces the balance sheet of Symphony, which operates through an asset light model wherein it outsources manufacturing of air coolers and uses the cash and carry model for sales. With zero debt status, it has maintained strong return ratios i.e. ROCE and RONW at 62% and 45%, respectively, and PATM of 25% over the years due to strong cash flow from operating activity.

The best part is that Symphony still has a huge market to tap, say Motilal Oswal analysts Niket Shah and Atul Mehra.

Also, HDFC securities have maintained a stance of buy on Symphony stock based on the recent acquisition of Australia-based Climate Technologies Ltd (CT). They expect this deal will add approximately to 4% to Symphony's EPS in FY19E and approximately 5% for FY20/FY21E.

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