Symphony Q3 Review- Higher Domestic Channel Inventory Leads To Below Than Estimated Numbers: Yes Securities

Yes Securities Report

Symphony Ltd.'s on consolidated basis reported lower than expected revenue on back of subdued domestic sales. Lower off take was on account of high channel inventory of the cooling products resulting from the poor summer sales.

Gross margins have seen expansion on back of tactical pricing, value engineering and softening of commodity prices, higher gross margin has resulted in expansion in Ebitda margin. Subsidiaries on the other hand has seen 12% YoY revenue growth on back of strong summer tailwind in Mexico and Brazil and improving performance of CT Australia and GSK China.

Symphony expects off-take to improve in Q4 as advance collections continues to remain strong and inventory levels have normalised. Management has already started to implement its strategy to turnaround its international subsidiaries especially that of CT Australia, where they have will be moving to outsourced model versus In-house manufacturing, introduction of new product category and increasing offering in existing products.

We feel improvement in performance of CT Australia will be more gradual. Considering lower than expected demand in the domestic business and gradual improvement in international subsidiaries, we downgrade the stock to 'Add'. We will wait for improvement in domestic demand before we get positive on the stock.

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