Hi Donald,
I can’t comment on the compounding rate of Mayur vis-a-vis Kaveri/Astral. But I can explain in a simple/crisp manner, why I still have faith in me, and why I can sleep smoothly even after investing 30% of my portfolio (theoretical situation).
Promoter : Mayur is known to have a capable, honest, but conservative promoter, who have 75% state in the company, no share pledging. A down-to-earth CEO, who believe in taking the tough path (at least regarding debt, where they follow the tough approach of getting cheap loan from textile ministry). They have a excellent track record of delivering good growth, and going by past experience, they should be able to do so, provided other environmental variable remain same.
Business : Mayur is a classic example of super-performer in a boring industry. It caters almost equally to auto, footwear, and other consumer segment. Synthetic leather is the way to grow forward, because of regulatory/environment impact normal leather. They have a marque list of client like BMW, GM, Ford, and pretty much all of major Indian footwear industry. It tells a lot about the quality of the product they make. It’s business is partly recession proof because of high percentage of clients are in footwear, and consumer segment. It is a pseudo-play in indian footwear industry. The market size is huge for it. Domestic competition is non-existence, international competition is majorly from Chinese player, majority of which are inferior in quality.
Valuation : With a consistent of ROE/ROCE of 40, a debt free status, at a PE of 12 is a value buy (PEG ratio ~ 0.33). How many companies are present who can match these figure. If PE rerating doesn’t happen for these kind of stock, I don’t know for which kind of stock PE rerating happened.
Recent run-up in its price post-bonus can be attributed to HNIs accumulating huge amount of stock (high volume, high delivery percentage), which again is an excellent news. They can buy such huge amount, thanks to funky indian law of short-term profit reducing via bonus. Otherwise Mayur has been a low-liquidity stock, where big player can’t even think of entering. With 75% with promoter, and another big chunk with HNIs, there are less amount of freely available stock of Mayur, which again is a good positive sign.
With management track record, huge business opportunity before them, cheap valuation, Mayur seems to be one of the best stock to have in one’s portfolio at the moment. I am not sure whether it’s compounding rate will be less than Kaveri (which I know is quoting at around 11, where its historic pe at 20, makes it a compulsive buy) or astral or not.