Mayur Uniquoters Ltd

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About the Company

Mayur Uniquoters is the largest manufacturer of artificial leather/ PVC vinyl, using the ‘Release Paper Transfer Coating Technology’ in India.

Q2FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had a great quarter with consolidated revenues rising 55% YoY and PAT rising 50% YoY. This was because of the low base in Q2FY21.
2. H1 figures were even better with 87% YoY rise in revenues and 120% YoY rise in PAT.

Investor Conference Call Highlights

1. The supply for BMW is expected to start from April 2022.
2. The input prices for Mayur have risen drastically in Q2 but the management expects Auto OEMs to provide an increase in price from jab onwards. There is a 3-4 month lag between input price increase and rise in selling price from customers.
3. The 7th PVC line has already started commercial production and it made sales of Rs 78 Lacs last month.
4. The company has appointed a new COO and is still on the lookout for a new CEO.
5. The maximum revenue potential for the PU Gwalior plant is Rs 100 Cr. The management expects sales of Rs 50-60 Cr in the next 12 months.
6. The company has also petitioned for an anti-dumping duty on PU.
7. The revenues for Q2 could have been even better but were restricted by the production constraint in auto OEMs due to the chip shortage. The company could have made Rs 30 Cr more sales without the chip shortage according to the management.
8. In Q2, footwear was 32% of sales, 58% was automotive while the rest was for others like furnishing. Of the 58% from auto OEMs, 31% were from domestic OEMs.
9. The management states that despite price increases for the entire industry, demand remains steady and customers are ready to procure even at rising prices.
10. The margin profile remains highest for export OEM followed by footwear after which domestic OEM and replacement come in.
11. Although the company is stocked with enough raw material for 3-4 months, it will face difficulties if the supply of PVC resin does not improve.
12. The management firmly believes in the potential doe PU to fully replace real leather in the auto industry with time.
13. Mercedes Benz had initially put in orders of 40,000 meters per month but they are procuring only 15000-20000 meters due to the chip shortage. The company is now coming back to 80% of the original sales numbers.
14. The company should reach 100% utilization in PVC By H2FY23 according to the management.
15. The input pricing pressure is almost non-existent for the auto sector but for footwear, it is turning out to be a big dampener according to the management.
16. The company is operating at 74-75% in PVC currently.

Analyst’s View:

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and a decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q2 performance for Mayur was excellent with 55% YoY revenue growth and 50% YoY PAT growth despite a drastic input price rise of over 40-50%. The management remains confident that demand remains resilient despite the price rise and the export OEM segment which suffered the most from the chip shortage is slowly rising back to normal levels. The footwear industry on the other hand has been affected a lot by the input price rise because of the inability to pass on an increase in input prices. It remains to be seen how long the auto segment will remain slow due to the IC chip shortage last and how long will it take for the company’s venture into PU to deliver on expectations. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q1FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had a mixed quarter with consolidated revenues rising 181% YoY and PAT rising to Rs 14 Cr from Rs 9 Lac last year. This was because of the low base in Q1FY21 from the national lockdown
2. The company saw a QoQ decline of 32% in revenues and 60% in profits mainly due to localized lockdowns in Q1.

Investor Conference Call Highlights

1. The global chip shortage is putting pressure on the auto industry in Q1 & FY22, and this is expected to affect Mayur’s sales to the auto industry as well during the year.
2. Demand from auto OEMs is expected to come back in the next quarter.
3. The product approval from BMW has been done with sales for this customer to start from April 2022.
4. RM prices have risen across the industry. Although the company had enough inventory to get through this price rise, it was also able to start increasing its prices.
5. The company also lost some operating leverage due to a fall in sales volumes which was reflected in lower gross margins in Q1 vs Q4FY21.
6. In response to the RM price rise, the company was able to increase its selling price by more than 30%. As the RM price comes down, it will gradually lower prices.
7. FY22 volumes should exceed FY21 volumes according to the management.
8. The issue in the auto industry is supply-driven while demand remains resilient. Thus the management is confident that auto-export sales will rise as the customers will come to a position to meet the industry demand.
9. The company is close to getting approval to supply PU to auto OEMs according to the management.
10. Including depreciation and interest, the PU business is making a loss of Rs 90 Lacs per month.
11. The company has already filed for import duty on PU resin and has had its first hearing some time back.
12. The company reached sales of Rs 1.5 Cr in PU in June.
13. The management remains confident in the PU business despite the slow uptake in it so far.
14. In 80-90% of cases, the company passes on the freight costs to the customer.
15. The company has finished its 7th PVC line and is expected to see production start in it soon.
16. Working capital days have risen from Q4 to Q1 due to localized lockdowns in the quarter. It should come back to historical levels as the restrictions have gone away.
17. Capex plan for FY22 is around Rs 25-30 Cr. It is basically for plant modernization.
18. Around 75% of clients for PU are existing customers for Mayur while 25% are new to the company.
19. The footwear industry was down due to showrooms closure during local lockdowns. It should recover as showrooms open up.
20. The new 7th PVC line will be used for all purposes for both domestic and export sales. The capex done on this line was around Rs 10-11 Cr.
21. The company expects sales of Rs 25-26 Cr from PU in FY22.
22. The management has stated that if all goes well, PU sales for Mayur may rise to Rs 100 Cr per year in the next 3 years.
23. The company is also exploring other avenues for artificial leather and has visited more than 15-20 interior manufacturers in USA.

Analyst’s View:

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and a decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q1 performance for Mayur was mixed with YoY rise but QoQ decline due to lower OEM export sales due to the chip shortage in the global auto industry. The management remains confident of bringing back margins to previous levels once demand comes back. The footwear industry has also stagnated due to the 2^nd wave of COVID in Q1 but it is expected to come back once demand rises in the industry. It remains to be seen how long the auto segment will remain slow due to the IC chip shortage last and how long will it take for the company’s venture into PU to deliver on expectations. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q4FY21 Updates

Financial Results & Highlights

Detailed Results

1. The company had a great quarter with consolidated revenues rising 34% YoY and PAT rising 40% respectively YoY.
2. FY21 numbers saw revenues fall 2.74% YoY due to loss of operations in Q1 but PAT was up 10% YoY which is remarkable for Mayur.
3. The company announced a final dividend of Rs 2 per share for FY21.

Investor Conference Call Highlights

1. The product supply to Mercedes Benz’s South Africa plant will start within a month.
2. The 7th PVC line is still commissioning and is expected to start production at end of July.
3. Currently, the company is selling around 40,000-50,000 metres of PU but the breakeven level is at 2,00,000 metres.
4. Demand from US auto OEMs has been down as many players are reducing their production targets due to the IC chip shortage.
5. The margin profile is expected to stay up as the product mix shifts towards PU. The management has stated that the adoption of PU is gaining momentum in USA due to it being environmentally better than PVC and more cost-efficient than real leather.
6. Although the material costs have gone up due to the production of PU, the margin profile has gone up even more which is preferable for the company.
7. EBITDA margin for FY21 was at 24%. Volume decline in FY21 was around 8-9% YoY.
8. Mayur sold almost Rs 7-8 Cr of PU in FY21.
9. The management assures that the demand from global OEMs is indeed intact but has been delayed due to the chip shortage and will come back up once it is sorted.
10. The company will start supplying 30,000 metres per month to Mercedes Benz at the start and it expects the volumes to rise to 50,000 metres by the end of Q3.
11. The company is not looking to expand the PU lines as the current line has a peak capacity of 4,00,000 metres but it is making only 30,000 to 40,000 metres currently. The management expects that this capacity should be sufficient for growth for the next 1-1.5 years.
12. The company is looking to make PU resin and will require a capex of Rs 150 Cr to set up a facility for it.
13. The company is now in talks with a South Korean company to make a JV with them for coagulated PU used for automotive companies. Coagulated PU is mainly to be sold to South Korean OEMs as most of the OEMs from USA use solid PU only.
14. The sales breakup was 32% export and 68% domestic. In terms of industry, sales breakup was at 8% for general exports, 24% for export OEM, 13% for domestic OEM, 21% for replacement, 33% for footwear, and 1.5% for others.
15. The management states that there is no proper competitor for Mayur in India for the OEM supply and there are very few companies making PU for auto in the world.
16. Mayur is currently pitching for Chrysler and once the process is over it will start approaching domestic auto OEMs.
17. The PVC capacity for Mayur is at 3.15 million metres per month.
18. The company sold 79 lac metres in Q4 & 2.31 Cr metres in FY21.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and a decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q4 performance for Mayur was phenomenal with its highest ever quarterly revenues and profits. The management remains confident of the product’s technical and quality edge which has helped it bag multiple export orders global auto OEMs. But international demand from auto OEMs has stagnated due to the ongoing chip shortage. The footwear industry has come back well for Mayur in the meantime. It remains to be seen how long the auto segment will remain slow due to the IC chip shortage last and whether the demand for Mayur’s products will remain resilient through it. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q3FY21 Updates

Financial Results & Highlights

Detailed Results

1. The company had a phenomenal quarter with consolidated revenues rising 23% YoY and PAT rising 52% respectively YoY.
2. 9M numbers saw revenues fall 15% YoY due to loss of operations in Q1 but PAT was just above flat YoY which is remarkable for Mayur.
3. The company made a good recovery QoQ which is highlighted in the QoQ rise in almost all figures.

Investor Conference Call Highlights

1. The management expects sales momentum to carry forward in Q4.
2. The company confirms product approval from Mercedes Benz in South Africa and BMW. The order supply of Mercedes Benz will start from Q4 onwards.
3. The supply for BMW will start from the end of FY22 or the start of FY23 onwards.
4. The company has also been selected by Volkswagen India and will be generating business of 30,000-40,000 meters per month from May or June.
5. The company is in talks with a global PU maker to supply PU to them from India for South Korean motor companies.
6. MG Motors is now buying 100% from Mayur in India.
7. The management has stated that it is contemplating opening up a plant in USA if the demand from the country is better than expected.
8. PU prices will likely be sold between $15-20 for Mayur.
9. The management has highlighted an ambitious target of breaking into the top 3 in the world market in artificial leather in the next 3-4 years.
10. Total volumes sold in Q3 were at 77,61,400 meters.
11. The margins at current levels are sustainable according to the management as it has risen due to a shift to a better product mix and Mayur has and will pass on any increase in raw material costs to the customers to preserve its margin levels.
12. The company has had its best quarter in terms of revenues and PAT margin.
13. The management expects revenues from the auto segment to grow 75-100% in the next 3 years.
14. The company will start its 7th coating line in March and it will reach a capacity of 6-6.5 Lac meters per month.
15. The expected volume in the Mercedes will be also between 30,000 to 40,000 per month.
16. The footwear segment is slowly rising as store footfall is rising but it is not able to match the growth of the auto segment.
17. Footwear segment sales have risen 14% YoY.
18. The company is also introducing new material to sell like sport shoe material from PU which it did not make in the past.
19. PU sales for Q3 were at Rs 2.5 Cr.
20. Fixed have risen in Q3 and it is expected to rise further as the primary force behind it was freight costs which are expected to stay up going forward.
21. The management has stated that it is on the lookout for acquisition targets with good machinery and R&D capability. Unfortunately, Mayur doesn’t see any such prospects in India currently.
22. The company has also received an offer from BMW to start supplying to its China unit if the current order goes well.
23. The management believes that the PU unit can generate sales of Rs 100 Cr in the next 2-3 years.
24. In the Indian PU market, 70% is for low grade, 20% is for medium grade and 10% is for high grade. Mayur is concentrating solely on the medium and high grade zones here.
25. The management is hopeful of starting a new plant for knitted fabric in the next 1.5 years.
26. The company has added a person from Taiwan who is very well known for R&D in the PU sector and the Footwear world.
27. Currently, the company is doing 180,000 meters of export to USA. Once this number reaches 4 Lac, it will look to start a local facility in USA.
28. The management hopes to gradually convert the PVC majority footwear market in India towards PU in the coming years.
29. The negotiation with Hero is still going on.
30. The current management has assured that Mayur will transition to a fully professional corporate structure in the next 1.5-2 years.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q3 performance for Mayur was phenomenal with its highest ever quarterly revenues and profits. The management remains confident of the product’s technical and quality edge which has helped it bag multiple export orders from international auto majors like BMW and Mercedes. The company’s domestic orders for Volkswagen & MG should help the company maintain good growth in the medium term. The new import duty on PU should also help the company increase its PU sales which have stayed stagnant to date. It remains to be seen how long will the non-auto segments take to match the growth momentum of the auto segment and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q2FY21 Updates

Financial Results & Highlights

Detailed Results

1. The company had a mixed quarter with consolidated revenues declining 5% YoY and PBT rising 8% respectively YoY.
2. The company made a good recovery QoQ which is highlighted in the QoQ rise in almost all figures.
3. H1 figures remained subdued due to bad performance in Q1.
4. The company has announced a buyback offer for 1.65% of total equity shares at the price of Rs 400. The record date for the buyback has been set on 25th  November.

Investor Conference Call Highlights

1. The months of September and October have been good for the company.
2. The management has seen auto sector demand reviving but footwear demand remains subdued.
3. December and January should be at most 10-15% lower than the last figures for the company according to the management.
4. The bigger worry for the company is the onset of COVID-19 in the EU which can dampen the company’s fledging exports.
5. The company is already approved by Mercedes-Benz for the supply to their South Africa plant and product supplies is expected to start for their new model from next quarter. The product approval from BMW has also been received.
6. Automotive sales may have been revived due to people avoiding public transport due to COVID-19.
7. The management expects footwear demand to come back since the wedding season has started in India.
8. PU sales have been subdued as most customers had stocked up in imported PU before the lockdown and have yet to run out. The govt of India has imposed an import duty of 10% on Pu which should help boost sales for the company and any other local makers.
9. The company has been able to increase pricing by 5% in Oct and 7% in Nov.
10. Exports accounted for 22% of sales while the rest 78% was domestic in Q2.
11. The breakup by segment is: Export general is 9%, export OM is 13%, domestic auto is 19%, auto replacement is 22%, footwear is 26%, furnishing and others are at 7%.
12. Total volumes sold in Q2 was at 58,44,868 meters.
13. Gross margins for the company depend primarily on volumes. Thus more volumes sold will yield greater gross margins.
14. The management expects the company to come back to the old margin profile in Q3.
15. Volkswagen orders are expected to be around 30,000, 40,000 meters per month at a price of at least INR 500 per meter. This is expected to start from March or April 2021.
16. The company is also pitching hard to get new models from America like Ford and Chrysler.
17. The management believes that it will take at least 1 year for the market to get established for PU.
18. The price that the company can commend from auto companies in the USA should be at least $12 per meter. The company is also in good standing as Ford & Chrysler are looking to add PU and Mayur is one of the only 2 companies in the world doing PU for auto.
19. The management maintains that Mayur will achieve cost savings of 15% in FY21.
20. The management is confident that given the large export orders that the company has bagged, it can easily surpass its record volumes sold in FY22.
21. IN the existing PVC lines, the company has a capacity to churn out 27-28 lac meters a month.
22. The management is not concerned about competition from China for PU as Chinese companies for PU are in bad shape as most of them had resorted to price competition and the rise in RM costs has left them in big trouble.
23. The annual revenue run rate for the PU line at full capacity is Rs 125 Cr.
24. The footwear market is down as most of the industry sales were from physical stores where customers could try out the products. Even big players like Bata are running at lower than 70% capacity.
25. The approved order from BMW will start in 2022.
26. In exports, auto exports are going mainly to the USA while general export is going all over the world.
27. For backward integration, the company is now adding foam laminations in the next 4-5 months as Ford, MG and Volkswagen are asking for laminated material and the integration can save Rs 25-30 on freight costs at the least.
28. The company is also looking to move to microfiber which has a price range of $7-20 depending on quality.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q2 performance for Mayur was good with good recovery in the auto segment while footwear remained subdued. The management remains confident of the product’s technical and quality edge but has stated that it may take the rest of FY21 for the company and its customer segments to come back to normalcy. The company’s export orders from Mercedes and Volkswagen should help the company maintain good growth in the medium. The new import duty on PU should also help the company increase its PU sales which have stayed stagnant to date. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q1FY21 Updates

Financial Results & Highlights

Detailed Results

1. 1. The company had a dismal quarter with consolidated revenues and PBT reducing 66% and 99% respectively YoY.
   2. Standalone revenues and profits were almost the same as consolidated profits indicating that other subsidiaries of the company were not in the loss in Q1.

Investor Conference Call Highlights

1. The company’s supply to the Mercedes plant in South Africa is expected to start from Q4FY21.
2. The product approval of BMW is still going on.
3. The sales for the quarter were down mainly due to production loss in the month of April and some days in May.
4. More than 50% of the business is coming from the auto industry.
5. Q2 is expected to be much better than Q1.
6. All the supplies are to be made to new models that will be released in the future.
7. The company is also expecting a deal from Volkswagon in the next few months.
8. There is good import substitution in the PU space as 90% of domestic requirements are imported. Currently, the demand for the company’s PU is low as most makers have stocked up on imported PU before the lockdown. The company expects new orders to come in a few months once these stocks deplete.
9. The management has stated that the rest of the year will be spent in getting back on track both for the economy and the auto and the artificial leather industry.
10. Capacity utilization is expected to come up to 60% in Q2. It was at around 27% of last year’s levels in Q1.
11. Most of the drop in other expenses is due to a drop in discretionary expenses like travel, etc. There shouldn’t much increase in these costs in Q2 as normalcy is expected to come back slowly.
12. The management stresses that the current times are going to weed out weak players and will make existing players more resilient.
13. The company has made sales of less than Rs 50 lacs in PU for Q1.
14. Auto OEM exports for Q1 were low mainly due to no exports during April and May.
15. Total volumes sold in Q1 were at 15.162 lac meters.
16. Volkswagen India is expected to bring in sales of 30,000 meters per month with Rs 12-15 Cr per year.
17. The value of the export sales is expected to be around 15% higher as compared to domestic sales.
18. The company is now supplying MG in the recent entrants in the auto industry.
19. The management maintains that the company remains competitive enough to compete for orders anywhere in the world.
20. Most of the plant operations were in 2 weeks of May and in June. Thus the company has only accounted for depreciation for the period when operations were open.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q1 performance for Mayur was dismal mainly on the back of the production shutdown during the lockdown. The management remains confident of the product’s technical and quality edge but has stated that it may take the rest of FY21 for the company and its customer segments to come back to normalcy. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q4FY20 Updates

Financial Results & Highlights

Detailed Results

1. 1. The company had a modest quarter with consolidated revenues and PBT growing 3.5% and 17% respectively YoY.
   2. FY20 performance was still dismal with consolidated revenues and profits falling 10.6% and 11% YoY respectively.
   3. Standalone revenues and profits were higher than consolidated profits indicating that other subsidiaries of the company were in the loss in Q4.
   4. The board has recommended a final dividend of Rs 1 per share for FY20.

Investor Conference Call Highlights

1. In the PU plant, most of the project construction activities are completed now with the commissioning of wet and dry lines of PU Plant. Small supply orders and dispatches also started from the plant on March ’20.
2. The plants were shut down 100% in April and were only operational 15% in May in the auto segment. The company expects sales to normalize from August onwards.
3. The management does not see any problems arising from China as the government continues to keep import duty and surcharge for leather products high which is beneficial for local players.
4. The management expects stock levels to normalize from Q3 onwards for most of the footwear industry.
5. The management has stated that among the major Indian auto companies only Hero MotoCorp is not a customer yet and the company is in the process of on-boarding them currently.
6. The overall volume decline in FY20 was 10%.
7. The main driver for the company in Q4 was OEM export which is expected to maintain its momentum going forward.
8. Auto sales have risen to 61% of sales in Q4FY20 vs 56% a year ago. Footwear has also risen 4% YoY in Q4.
9. The volumes breakup was 55% auto, 30% footwear, and 15% others.
10. The company expects good demand for PU footwear going forward due to the increase in import duty for PU footwear from China. The price difference is around 15-20%.
11. The company has placed an order for an additional coating line which has gotten delayed by 6 months due to COVID.
12. Growth in Value of exports in Q4 was 19% YoY. In volumes terms, it was 12.5% YoY. OEM exports grew 58% YoY in Q4.
13. In the domestic OEM, value growth was 6% YoY while volumes declined 2% YoY. This was due to more orders for value-added products which increased value.
14. The management has stated that there is huge potential in OEM exports which yields the company around Rs 550 per meter vs Rs 230 per meter from domestic OEM.
15. The company is in close talks with a Korean company to supply PU to the auto industry there.
16. The company is also close to a deal with Ford Motors to supply PU.
17. Most of the raw materials for the company are crude derivatives and the management does not expect any big rise in RM costs for the company going forward.
18. The management has provided a contrast in the footwear industry in India and China, wherein in China 80% footwear is PU and 20% is PVC while in India 95% footwear is PVC and 5% is PU. The management has stated that this is mainly due to the huge demand for cheap footwear in India.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. The OEM export revenues have risen 58% YoY indicating good performance in this segment. This is also good for the company as the realization per meter from OEM exports is more than double the realization from domestic OEMs. The management remains confident of the product’s technical and quality edge. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q3 FY20 Updates

Financial Results & Highlights

Detailed Results

1. 1. The company had another dismal quarter with consolidated revenues and PBT falling 13% and 8.3% respectively YoY.
   2. But the recovery was good with revenues and PBT rising 5% and 30% QoQ showing good quarter on quarter progress.
   3. Standalone revenues and profits were lower than consolidated profits indicating that other subsidiaries of the company are generating considerable profits in Q3.
   4. The main reason for the difference in PBT decline and PAT increase is the reduced tax expenses for the quarter.
   5. The board has recommended an interim dividend of Rs 1.5 per share for Q3FY20.

Investor Conference Call Highlights

1. The management has stated that it has seen a small rise in the auto market since December. The company is also getting greater sales to demand from the auto market customers.
2. The company has approved by the South Africa plant of Mercedes Benz from Q4FY21. The company is still in the product approval phase with BMW.
3. The management expects good revenue growth from auto customers in both the export and domestic markets.
4. The management expects a 20% increase from exports and a 10-15% increase in the domestic market in the coming quarters from auto customers.
5. The construction of the PU plant is complete and commercial production has started in January. The management expects plant stabilization of large supply orders within the next 2 months.
6. The company is not dependent on China for raw materials as most of the imports are from western countries.
7. The management has said that auto demand has increased for the company’s products and it has received a few big orders here.
8. The share of footwear in revenues is around 30% in Q3.
9. The management has stated that the company has been strict in its credit policy and thus the share of the revenue from footwear has gone down. The automotive share has gone up which has also pushed the footwear segment share down. The management is confident of demand coming back for PU in the footwear segment from China if not from India.
10. The management is also looking to introduce the PU material to auto customers which can turn out to be a big opportunity for the company if it materializes.
11. The total volumes for the company were at 60,77,000 meters with 73% in domestic & 27% in exports.
12. The management has mentioned that PU can be used by anyone using PVC except in the auto industry where the company is pushing for this substitution.
13. The management maintains that the company still retains its technical and quality advantage over its domestic peers. It has lost the automotive market share in recent years mainly due to the management commitment to not compromise on the quality and margin of the product. This is what enables the company to compete in the auto export market as compared to other domestic players who can only work in the domestic auto market.
14. The management believes that in the long term the footwear industry should move towards quality as demand for high-quality products rises and the company stands to capitalize on this as the only PU manufacturer in the country.
15. The management has stated that the company has achieved margins of 20%+ despite an increase in raw material costs. This is mainly due to the company’s ability to deliver superior products which have helped keep margins up.
16. The company is also looking for opportunities to tie up with Korean manufacturers to address international market orders.

Analyst’s View

Mayur Uniquoters have been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company has stayed resilient in maintaining and even improving its margins. The company is making good inroads into the auto-export segment. The company has already started commercial production in its PU. It is also seeing good demand coming in from new auto entrants like MG where the company is 100% supplier for artificial leather. The management remains confident of the product’s technical and quality edge. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.

Q2 2020 Updates

Financial Results & Highlights

Detailed Results

1. 1. The company had a dismal quarter with consolidated Q2 revenues and PBT falling 19% and 32% respectively YoY.
   2. Standalone revenues and profits were lower than consolidated profits indicating that other subsidiaries of the company have started generating profits in Q2.
   3. The main reason for the difference in PBT decline and PAT decline is the reduced tax expenses for the quarter.
   4. The board has recommended an interim dividend of Rs 1 per share for Q2FY20.

Investor Conference Call Highlights

1. The management attributed the decline in revenues to the current auto sector slowdown which has trickled down to supplying industries.
2. The company expects its deal with BMW to be completed within the next few months.
3. The new plant construction is completed and the trial runs are expected to take place in the last week of November with commercial production starting from January onwards.
4. The management remains committed to keeping the company performing as best as it can despite the difficult environment.
5. The management is hopeful that the situation gets better from Q4 onwards and they are also trying to reduce their dependence on domestic revenues and seeking out new export clients for their products.
6. The management has stated that the downturn in the auto sector is not as bad as the footwear sector.
7. The management has stated that margins have suffered due to oversupply in the market due to demand slowdown.
8. The management doubles down on the market potential of artificial leather considering the cost advantage, quality consistency and the environmental impact vs genuine leather.
9. The other expenses have risen due to the booking of provisions in the quarter.
10. The monthly fixed expenses of the new PU plant are estimated to be around Rs 1.35 Cr.
11. The company has also added TVS and MG Motors as clients in the quarters.
12. The raw material prices are expanding in line with crude oil prices.
13. The capacity of the new plant is expected to be around 450,000 to 500,000 m/month with machine cuts.
14. The company is looking to add marquee names in the footwear industry once the new PU facility is completed.
15. The company already has purchased the machines for capacity expansion but it will be installed once the market conditions normalize and get better.
16. The company has opted for the new reduced tax regime of 25%.
17. The company has laid off 120 people and have been rationalizing their expenses to reduce total costs for the company.
18. The management has affirmed their commitment to maintaining a high margin business and they will be doing the same with their new PU product line.
19. Total volume for Q2 was 61,83,411 m vs 77,42,381 m last year. The main declining segments have been the auto replacement (42% down) and footwear (37% down).

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. Additionally, the focus segment of Auto OEMs has also been going through an industry slowdown which has further depressed the company’s revenues. It remains to be seen how long this auto slowdown shall last. Mayur has been proactive in attracting and negotiating with export customers despite the process being long and time-consuming. Nonetheless, the promise of their upcoming PUC leather segment and their export customer acquisition including Mercedes Benz and MG is what keeps this stock in our watchlist.

Q1 2020 Updates

Financial Results & Highlights

Detailed Results

1. 1. The company had a dismal quarter with consolidated Q1 revenues and profits falling 11% and 57% respectively YoY.
   2. Standalone revenues and profits were higher than consolidated profits indicating that other subsidiaries of the company have been operating at a loss in Q1.
   3. Other income has also taken a drastic fall from Rs 6.8 Cr in Q1FY19 to Rs 3.7 Cr in Q1FY20.
   4. The board has recommended an interim dividend of Rs 0.50 per share for Q1FY20.

Investor Conference Call Highlights

1. The management has attributed the decline in revenues to the auto sector slowdown.
2. The company has been approved by Mercedes and product supply for this is expected to start from Q3FY21. The company is also inline to secure other contracts from major auto manufacturers including BMW in the coming quarter.
3. In the PU project, major construction has been completed and most of the machinery has been assembled. The company is targeting trial production start from October 2019 and commercial production from December 2019.
4. The difference in standalone and consolidated numbers of Rs 7 Cr around 4 Cr is from an increase in inventory on a consolidated basis. This occurs because during every Q1 the company sells some stock to subsidiary companies which gets reduced over the rest of the year. This causes overall profits to go down but this downfall is unrealized and gets mitigated over the rest of the year.
5. The company is in ongoing talks with a major US car manufacturer for providing 150,000 yarns of products per month and the decision for this contract shall be known by August end.
6. The management has refrained from providing any guidance on the auto sector slowdown but they assure that the company is keeping on adding new customers in this sector.
7. The automotive segment revenue is down only 10% in the current quarter.
8. The major part of the revenue fall in this sector is from the replacement segment of the market.
9. In the current low demand environment, the management is focusing on cost control measures.
10. The management is confident of good growth in the coming years on the back of the auto sector supplying. This is because auto OEMs tend to be loyal customers once the business relationship been established.
11. The raw material prices increased by more than 60% due to rise in oil prices.
12. Revenue breakup is as follows:
    • Exports General:             Rs 10.2 Cr
    • Export OEM:                    Rs 27.28 Cr
    • Total exports:                   Rs 36.61 Cr
    • OEM Domestic:               Rs 14.47 Cr
    • Replacement:                   Rs 19.2 Cr
    • Footwear:                          Rs 46.09 Cr,
    • Furnishing:                       Rs 1.54 Cr
    • Others:                               Rs 7.71
13. The company has a cash position of Rs 184 Cr and the balance of Capex left for the year is around Rs 45 Cr.

Analyst’s View

Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. Additionally, the focus segment of Auto OEMs has also been going through an industry slowdown which has further depressed the company’s revenues. It remains to be seen how long this auto slowdown shall last. Mayur has been proactive in attracting and negotiating with export customers despite the process being long and time-consuming. Nonetheless, the promise of their upcoming PUC leather segment and their export customer acquisition including Mercedes Benz and MG is what keeps this stock in our watchlist.

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