Mayur Uniquoters ~ Market Leader in Indian Synthetic Leather Market

What does it mean by ‘promoters intend to participate in buyback’ ? You mean promoters are going to sell their shares and buyback the same for the company at 500/- when stock is at 380 ? Any news on dates of buyback ?

@am648,
@Mayur Investors,

Why are domestic volumes not growing ? All 4 wheelers showed excellent numbers in last 2 years. Also footwear companies like Relaxo, Bata did reasonably well. What is the proportion of domestic to international business ?

Does the family feud settled now ? or still going on ?

As @yogesh_s pointed, what is the use of Rajasthan plan if there are no growth drivers ? Any new orderbook from Auto or footwear industries ? Why you believe fundamentally stock may go up in future ?

Not invested, but tracking.

The buy back has already been completed.

Yes, I was also trying to update the production numbers and realisation details but couldn’t find the same. I even wrote to the company but didn’t get any response. Someone following the concalls might be aware of the same?

Regards,
Ayush

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It is available on their website,
Sales 24.32 mn metres for 2015-16.

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I agree with you.

The production capacity is 3.05*12 i.e. 36.6 million linear meters and if the sales is 24.32 million linear meters then capacity utilization is just 66%. It is far away from fully utilize the production capacity.

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I dont think capacity calculation is generally as simple as that. Capacities are typically based on optimum working conditions which provide maximum running speed in the machine. Not all products can run at those speeds.

For example, I can imagine that if there certain qualities that require a thicker coating of PVC, it may take longer time to dry and therefore might need to run slower in the dryer. It is possible that the company gets higher realizations for such qualities. This is just a hypothesis and needs to be verified by the management.

Since 2013-2014 when everyone was gung-ho about the company and the PE had reached 34, the capacity has increased 24% but production has also increased by 14%. I dont think that there is a significant mismatch between production and capacity addition in the last 2 years.

I might be wrong but it is certainly not correct to draw conclusions from these figures.

However, the feud within the family certainly raises questions.

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I have a question for long term investors in this company.

50% of the sales comes from footwear industry so footwear is an important source of revenue and profits for this company. do you think footwear made with artificial leather is actually good? Does it have enough strength to take on the pounding it gets on Indian roads?

In my opinion footwear made with artificial leather is popular in India because it is cheap. Natural leather is 3 times costlier than artificial leather so naturally it will be more expensive. However, it also lasts longer so on a total cost of ownership basis, natural leather footwear is actually cheaper although it has a higher price tag initially.

As income levels in India will grow over long term, do you think middle income people will switch to natural leather / other materials while artificial leather will be sold to footwear brands targeted at low income? Such a switch will see margin pressure on the company. In developed countries, artificial leather is not even used in furniture let alone footwear as it is not strong enough to be durable in those applications.

I know that the auto contributes 35% and artificial leather is gaining popularity because auto seats and other uses of artificial leather in auto is appropriate given the wear and tear in that use case.

Any gains in auto will be offset by decline in footwear margins. Do you agree?

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No. Artificial leather is here to stay. Natural leather has concerns from environment and animal rights perspective. In fact increasingly, the quality of artificial leather is likely to get better. PU leather is a step in that direction.

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Anybody has inside information about promoters family fight? Why company loosing its focus on growth and earnings QoQ

As per this report, Mayur Uniquoters’ PU plant is coming up in Madhya Pradesh and they have got approval for the project and capex is 109cr.

Discl: I hold Mayur Uniq

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Mayur Uniquoters Ltd has informed BSE that Mr. Manav Poddar, Non- Executive Director of the Company has resigned w.e.f February 16, 2017.

In this case, I’m guessing succession plan might be that Mr. Suresh Poddar who is 70 years old, who has been appointed as chairman upto 2020, might hand over the baton to Mr. Arun Kumar Bagaria at some stage. Are any other details known about this ?

Discl: I hold Mayur Uniq

This is a big disappointment. This is the second time that Manav Poddar has resigned. Not sure what made him return the first time. Anyway, nothing is happening in the business and we need to wait for the PU plant to get commissioned for things to get interesting again.

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leather getting dearer may benefit Mayur? http://www.hindustantimes.com/india-news/beef-ban-leather-cricket-balls-and-footwear-may-get-costlier/story-wpUshJ54jwU9V8FzlSYJgJ.html

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Was going thro Mayur Q3 call some time back too see how business is going.

Some notes:

YTD sales down -5.19%, profit up 6% ytd
Footwear was down this year mainly due to demonetisation.
demon impact for mayur - nov -10%, dec -35%,jan -10%, feb is ok.
exports increased 11% 9mfy17

Get a feeling scaling up of auto OEM exports is taking much more time than expected.

Further growth triggers:

PU plant: selected land in MP. 10-12cr for land. Will take 18 months for setting up of plant
Already customers waiting for this PU plant primarily in footwear like bata. Even Zara waiting for this
Jasch industries is a small company in this segment otherwise mainly PU is imported from china. There is no organised player from india here.
The site has capacity for 6 lines. Initially starting with 2 lines. Initial sales/profits will come in H2FY19.
Total investment will be close to 100cr in next two to three years.
Realisation is 25% more than PU. however the cost is more due to water treatment etc.

Capex in mysore: Currently two lines in jaipur is dedicated for footwear manufacturers in south. Plan is to move these lines to mysore which will save transportation costs and faster access.
Land is procured in mysore. Business will grow 20% due to this. Lines will be freed up in jaipur due to this. Totally 30cr investment for 1 line (due to higher land cost).

Auto OEM exports:
Europe: appointed a dedicated marketing person for europe for talking to merc bmw and volkswagen. Hoping to crack in a year.
MD and R&D head are continuously travelling to europe. Some positive developments in a year.

US: no major progress. in 9m sales were up 14%.
chrysler, ford, GM are inviting quotes for new programs. will know in next 2-3 months.

Furnishing: Fy17 11 distributors appointed. Plan to have 50 distributores in fy18

Domestic auto OEM: 8 new programs from mahindra and tata have been approved. expecting good growth in fy18.

Negatives:

Raw material price has increased (PVC resins price increase 15%, plasticizer 10%). Talking to customers for price increase will decide by March.

There seems lot of competition in footwear industry given by newer brands to vkc, paregon , bata and relaxo. It is easier for smaller suppliers to start footwear plants by getting cheap machinery from china.
( I could not understand this. Relaxo, bata sales have not fallen in dec qtr or ytd). But mayur sales to footwear down 22%.
There was big impact due to demonetisation in footwear industry.

Capex: 100cr for next two years. currently running at 75-80% utilisation

Overall My summary:
Company is focusing on cracking export (mainly Euro) auto OEM market. This will help scale up operations.
Meanwhile they are investing in PU plant in a big way where they have clients (footwear companies) waiting ( will be ready by H2Fy19)

Disc: No investments.

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Dear All,
Can anybody update on the Q4 concall highlights.
Regards,
Raghu

Conf call Q4FY17 highlights:

FY17 was majorly impacted due to slow down in footwear and demonetisation. Other segments grew well…

Sales breakup
Exports - 30% of revenue -145cr in fy17 q4fy17-36cr
auto oem - FY17 106cr 32cr in q4fy17
general export - 8% of sales
footwear- 180cr

Euro OEM
Currently no sales from euro auto OEM.
German guy appointed for being in-charge of euro auto OEM. Mercedes one audit done. Next audit in Nov.
The RFQ etc will take 6 months. If everything goes well, then sales may be begin in June July next year (2HFY19)

OEM exports to US
Chrysler sales are increasing - new model launches by Chrysler increasing - fy18 will have sales only to USA, nothing to Europe

Domestic Auto OEM
Auto growth is very good - mini 15% domestic OEM in fy18
Supply high value added items only to Maruti

Guidance
Fy18 - 10-12% sales growth
Raw material prices started increasing hence company took 3% price hike after that raw material prices started softening. April and May lines under production have gone up from 4.5 lines to 5.5 lines - June is also good

Furnishing - 15% growth- fy18 appointed new distributors in all states - gradually seeing good response

Footwear:
40-45% of current sales is to footwear
Supply 70% of Bata requirements. But, Bata now is outsourcing majorly. Hence their requirement is stagnant.
April May has been good for footwear.

GST can be good growth driver if implemented properly. Currently majority of clients in south.
Not supplying to clients in north india due to higher market share of unorganised not paying exercise, VAT.
If GST implemented properly, this can add to Mayur sales.
GST - good benefit - most of products in 12% tax category

Capex:
PU plant in gwalior will need 100cr. Plant construction will start in July 17 will be ready by 2HFY19. PU plant will not lead to cannibalisation of existing sales. Though customers are same, products are different

Mysore plant construction will start in July. Also ready by 2HFY19 capex of 50cr - This is for clients in south. will automatically lead to 15-20% growth in business. Mayur can deliver to footwear companies in south in 4-5 hours instead of 6-7 days.If the trend of april may continues of good growth, will add new line to mysore instead of moving one line from north to mysore.

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Thanks Ananth for an excellent summary.
QonQ performance should be good for current quarter as 20% increase in utilisation and 3% increase in prices.

What I found concerning was that they were unable to pass on the raw material price increases. Reasons could be:

  1. Volatility in prices. They usually passed on with a lag of a quarter, as prices increase and come down again, they are unable to pass on.
  2. Unutilised capacities and lower demand could imply inability to pass on price increases as before.
  3. Fall in prices were not fully passed on to the clients, so rises also had to be taken.

Overall seems the situation would change for the better due to:

  1. Impact of GST
  2. Completion of new plants in Gwalior and Mysore.
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Thanks Ananth for an excellent summary. It was indeed very well captured.

My biggest concern has been the Promoter’s Son, Mr Manav Poddar. Who left the company board also after the dispute with the Father and Brother in Law.

He could potentially start a new battle at the shareholder level given he was running the company for the last 20 od years and he brought the PE investors etc.

Company is well run and professionally managed from top to bottom. Son is law of Mr Poddar is a well groomed and educated, however, Manav cards for now are closed. I am sure his interest and minority shareholders like us are aligned and he is infact a minority shareholder himself so he might end up selling his stake or carve out the Gawalior Plant and spilit the company… all of this suggest me “uncertainity” but nonetheless upside once clarity emerges given Manav interest are aligned with higher share price for MU.

Thoughts welcome to my concerns and evolving thoughts!! this is the major risk overhanging for last two years… Remember Mr S Poddar is 71++

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Mayur Uniquoters.docx (5.1 KB)

Notes from the 2017 AR. One question that’s yet to be answered

  1. What is the status of the Rajasthan operations? There seems to be no discussion regarding it in this report
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