Thanks Donald andVipul for the comments. Any chance you guys have the last 5 years annual reports (can’t seem to find it on the company website)? Donald by any chance do you have EBITDA margins for export and domestic biz, also, how much of their capacity is used for export business.
Low float is good as long as the promoters are on your side (meaning they think there is enough potential for the stock to rise further) However, please remember that they know the most of how their company is doing and if they decide to sell, all the non-promoter shares are left holding the baby. I feel this company is fundamentally strong, however not sure, if this is their peak performance and you do not definately want to buy it at the top. What makes me uncomfortable is the OEM business, altough high margin business, lot of OEM suppliers in Indian in 2007 got burned badly when the cyclical car industry in the US went through a downturn. So, want to segregate that part, and see what is the business worth (just the footwear & domestic car suppliers).
I will mail you the ARs separately or send you an acrobat.com invite where we had shared the ARs when we initiated discussion on the stock.
I agree with you this is not the time to enter the stock… let some of the froth slide away first. And sure enough the market will give us more opportunities to enter more meaningfully, if it really deserves more allocation.
Meanwhile lets see how it performs and continue to dissect it. Good Nidhi that you started looking at it now and have a good skeptical bent… I am prone to be more optimistic than skeptical when I start seeing a few things I like.
How much a role exports are playing in propping up the overall margins is a good angle to investigate - raised by Hitesh also and now you Nidhi. Only the Management can give us clues on that, no other way at the moment…let’s keep engaging with management and maybe get a rough idea on this gradually.
I am generally skeptical of commodity companies because if you don’t understand the business dynamics well enough you could be in for some nasty surprises which might lead to a temporary(if not permanent) but long loss of capital,assuming one doesn’t book out.
So i started reading about Mayur with a lot of doubts. Having gone thorough the brilliant reports and discussions by Mr.Donald and team i am inclined to think that this might just be something to get more interested in.I know i am late to the party but although Infosys went from 300cr to 600cr it was still a great buy at that price :-).
Correct me if i am wrong - but what differentiates Mayur from other companies discussed here like Relaxo and Manjushree is the free cash flow and seemingly asset light nature of business? Does this mean Mayur can scale from the current 250cr topline to say a 1000cr topline and generate free cash of about 200cr in 6 years - equal to its current market cap?
I had looked at the discussion on TED between someone called breeze and donald and others about the scope of the company if it gets its things right in the OEM markets of US and europe. If this thing materialises then what you mention maybe a distinct possibility and we might have a big one on our hands even from these levels.
From whatever interactions I have had with people who have met the management I always have managed to get excellent feedback about the management – their vision and their integrity.
The opportunity of replacing natural leathers with artificial leather is humongous to say the least both in India as well as abroad.In a typical Bata shop artificial leather is on equal footing with natural leather.
This factor alone is sufficient for assured growth for long time to come.Promoters are ethical n competent lot specially the 2 nd generation Manav who has been the catalyst for improvement.So lets remain invested n keep on buying on every dip n specially after a bad quarter
Some research lead me to the fact that its big Canadian competitor is moving away frompetroleum based synthetic leather to a bio-based method using soy beans and recycled bottles. They have developed a product after extensive research and is ready for commercialization. Toyota has given this bio-based synthetic leather an OK after its usualrigorouspurchase qualifying standards. They are pursuing Ford and Hyundai for this now and are quite optimistic about grabbing those deals.
I am sure the Mayur’s management is cognizant of this development and may be we should check the possible impact of this from them or others in the industry.This could be a game-changer in a go-green world.
PS: This Canadian company apparently has 85% market share in selling synthetic leather to the US auto sector. Although i cannot corroborate this figure - they seem like formidable competition.
Hi Prabhakar - Was wondering, if you can disclose the name of the canadian competitor.
I did a segment analysis by products and the product that is sold to domestic guys is “coated man made fabrics” while the one that is exported is “coated both side fabric”. Pls correct if my assumptions here is wrong. FY2010 saw volume growth, while FY2011 saw price increases.
Coated Man made fabrics production increased from 7mm in fy08 (avg realizations of Rs. 109) to 11.74mm in fy11 (avg realizations of Rs. 159). Export oriented market ( coated both side fabric) production increased from 0.36mm in fy08 (avg realization of Rs. 311) to 1.67 mm in fy11 (avg realizations of Rs. 386). Coated man made fabrics production increased by 68% but price increased almost 47%. on the other hand,coated both side fabricincreased by 360% and price increased by 24%. In my view, if this company has to go to next level, itcan do so by diverting or adding more capacity to exports. Prices in the domestic segment are already at the top, if at all, customers like Bata would ask for lower prices, given that consumer demand in India is likely to slow down as well due to heightened inflation. BTW, was wondering, how often does the pricing with customers like Bata and indian auto oem’s work? Would the company benefit if raw material prices fell and they could still charge Bata and others the same prices.
on the export front, if assuming all new capacity was diverted to it, it could bring in an additional 230 cr in revenue (6mm capacity * Rs 386/mt). This would mean the exports grow from current 1.67mm to 6mm, almost 250% increase. On the PAT front, this means (assuming 12.5% margin) an increase of PAT of about 32 cr, which would be big for the company. I think this is the scenario which will propel the company into the 500cr revenue, 50cr of PAT. Not sure, how achievable this is for the company? I don’t see domestic demand alone pushing the company into such kind of revenue and profits.
Hence, i am of the view, that the company will trade at the current levels, possibly take some time consolidating and forming a base, until some new “export related” triggers come along. BTW, was wondering, how much money does the company currently spend on R&D.
I don’t think the company has any plans to divert all capacity to exports.If i am not wrong they mentioned they want to see a 25% revenue contribution from each segment.
Total Income up 29% to 69.58 Cr from 53.94 Cr.
EBIDTA up 13.1% to 9.59 Cr from 8.48 Cr.
Net Profit up 16.2% to 6.1 Cr from 5.25 Cr.
EBIDTA margin is 13.8% V/s 15.8% (JQ-10) and 13.4% (MQ-11)
NET Pr margin is 8.8% V/s 9.7% (JQ-10) and 9.3% (MQ-11)
Raw material costs as a %ge to Income is 76.5% V/s 71.2% (JQ-10) and 76.5% (MQ-11)
Employee plus Other expenses to sales is 9.75% V/s 13.1% (JQ-10) and 10.1% (MQ-11)
Tax Rate is 33.7% V/s 34.4% (JQ-10) and 28.9% (MQ-11)
Looks like an initial kneejerk reaction to the margin pressure witnessed in this quarter. This usually happens when there is a sharp run up pre results as seen in ajanta and mayur and titan also.
In both these cases results have been fairly good as compared to some howlers in the electrical appliances space like crompton, bajaj electricals, voltas, hitachi, blue star etc and consumer space like hawkins where the stocks corrected very sharply.
Mayur Uniquoters has sizeable raw material import bill. Rupee depreciation may hurt?
What are your impressions?
FY2012E
FY2011
FY2010
Sales
310.00
248.56
164.73
Raw
Material
235.60
184.25
120.19
RM/Sales
%
76.00%
74.13%
72.96%
Raw
Material Import
87.96
68.79
43.0597
Capital
Goods Import
20
7.49
0.4337
RM
Import%
37.34%
37.34%
35.83%
Forex
Expenses
5
3.69
0.85
Total
Forex Outgo
112.96
79.97
44.34
Exports
77.5
47.61
16.72
Exports %
Sales
25%
19.16%
10.15%
Net
Forex Outgo
35.46
32.36
27.62
If we take Exports ramping up to 25% of Sales for the year, there will be atleast 30-40 Cr net outgo on Forex. With exports going up, export commissions will also be up! RM/Sales may be near 80%! The figure could be higher at 40-45 Cr.
I think these will be felt in the dec qtr bcos most of the sep qtr was benign in terms of forex rates. This quarter there will be impact for the full month of september only.
Any idea how much advance raw material procurement the company does in months?
BMW,Mercedesand includeJash Referring to Jasch Industries , This company also quiet interesting .jasch hasdeclaredtheir first maiden dividend . promoter were interested buyback stock long back in 208 which were held after collapse and accumulated later in open market . Good turn over …Any inside information about thiscompany.
After the run up to close to 390 levels in early nov 2011, Mayur came down to retest its earlier lows and in the process took support at its 200 dema and then gave a bounce.
Even with change in sentiments with the bump up in nifty, there does not seem to be too much market conviction about small caps and some midcaps. Looks like a good time for those looking to build portfolio consisting of small and midcaps for the next 2-3 years.
Keeping aside the concerns of the forex/raw material prices, if One looks at the bigger picture for Mayur where once the knitted fabric facility goes on stream , the current price of below 350 looks like a bargain price to pay for a company with neat balance sheet, high ROEs, excellent management and good dividend payout, high asset turns etc.
At every big correction, the first stock I unhesitatingly buy more is Mayur. Apart from the excellent fundamentals and prospects, the big chunk of dividends coming our way is a big incentive. One can keep buying more of the same from the same!
