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Hitesh Sir,
All these TV recommendations can be trusted , or most of them turn out to be opposite?
Not incase of Mayur as such, just in general scenario, Pls share your wisdom on this… Thanks
flag
** now.all **
fire.
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Like in life, nothing can be generalized. Some are good, some are horrible 
sukhvinder,
you can drop this sir bit.
regarding trusting the recos made on tv, most of the guys recommending fundamental picks like pn vijay, tulsian, deven choksey etc seem to have a good track record. But it is always essential to do our own research before taking a leap.
Problem is that once these guys speak on tv, there is immediately a spurt of buyers which jacks up the prices on that particular day. So some enthusiastic buyers may get stuck at higher prices.
fFrom 25-09-2012 mayur got listed on nse exchange also
Np Growth of 52%
EPS Growth of 52%
Diwali Fireworks started.
Mayur Uniquoters Conference Call - Today - 9th Nov
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Rough notes taken; maybe cryptic for you; ask clarifications if needed. Others who attended, may please add to this.
20 sep - Knitted fabric started;
5th coating line - 6lac lm/month - capacity will go upto 2.5 mn mtrs per month (July 2013)
Artificial leather - footwear, ladies purse, bags, furniture, automotive
1). Exports
22.72 Cr Exports vs (53 cr whole year, this year 42 Cr in Half year, expect to go to 80 Cr)
60 Cr - 80 Cr change outlook in 3-4 months is huge?
US auto ind is doing v well; suddenly reqmt has increased tremendously; 45 days shipping, so inventory; plus new year demand
Also in Gen Exports - 2 importers from European countries - have signed on
Is this sustainable?
Should be able to maintain.
370 Cr projected earlier for FY13; 189 Cr already achived in 1H ; revising guidance upwards?
We should be able to do at a minimum 379 Cr!
2). bmw/mercedes/gm - 2 years going on - what timeframe will we see orders
Next calendar year - we should be able to get something from Mercedes - they have given us car model; and also a bus model
3). new line 5
production - mid july 2013; may delay by 1 to 1.5 month; we will make this fully automatic like the mixing lines, so it may have slight overrun
4). Knitted fabric - prodn started
first few months goes on trial/adjusting m/c. Already installed 14 machines. 1st week January, stable production 3 shifts will start
14-15 mcs - 50-60% of inhouse requirements; we will keep on adding ; process unit can add easily 30-35 machines
5). 183 cr - exports 42 cr so 22% in exports
chrysler/ford - 20.86% (83% growth over last year)
gen exports -3.5% (40%)
auto oem India - 6.8% (
footwear 52% (14%)
gen (reduced by 1.5%)
couldn’t jot this down quickly; if someone has correct figs, please update
6). Margins picture across segments
Domestic auto OEM margins - very bad. All other segments footwear, gen exports or auto OEM exports margins are at similar levels.
domestic oem is say 115 rs/mt;; 380 rs/mt in exports; ofcourse quality is much higher
7). footwear - bata, action, liberty, paragon, bkc, relaxo
bkc & paragon - leading byuer -together may account for 22% - 23%
honda motor
footear, auto rerplacement, exports - margins almost the same ; may be 1% her or there; but in realisation exports is much higher value; alsothe machine is working for the same amount of time;
8). Crude risks - in 2 years time - yarn price has increased by 60-70%; crude has not increased as much; it is essentially a demand supply equation
9). US mkt- usa and canada synthetic leather; labour and overhead costs are high; supplying from here+freight+inventory cost - and still we can be cheaper
we have started getting enquiries for any new model from many manufacturers; so growing in exports should not be a problem
10 Capital Structure
TUF - 5% interest subsidy; Bank interest 11% term loan - so cost is 6%; so for this project may be 20 Cr from bank and maybe 30 Cr from internal accrual; total 50 Cr -25 cr for fabric unit; 25 cr for 5th line
11). Gen exports
Big distributors from US is coming down from US to meet us - hopeful to signing some deals; Mr Acharya has made 2 visits lining up; in next 6 months we hope to do something; Us will be mostly furnishing segment 60-70%; rest others marine boats,
golf carts etc; but say shoes, ladies bag etc are all imported; 45 days inventory
12). fabric - only 15% of total RM cost; so when commissioned and running may make for half a percent to 1% difference in margins
13). 1.85 mil mtrs per month currently; working at 90%+ capacities
for the last few months we have been producing 1.7 mn per month average; we can work 25 days, 26 days, or say 27.5 days; earlier when we din’t have 4th line we have even worked at 28-29 days.
14). realisation per kg - 211 rs??; energy cost is increasing and will keep on increasing ~2-3%
15). Fores
fx gain - 2 cr this qr; do we hedge/not hedge?
frankly speaking - hedging exp of last 2years - it makes hardly a difference of 10-20 lakhs; we have taken a decision now not to hedge;our exports are increasing, so risks on forex are reduced; we are also trying to source more n more locally like pvc or plasticisers to reduce forex risks - even if it means buying 1 or 2 rs higher
16). 28% value growth for half year - volume growth??
10-12%
17). Paragon -sources 90% of their requirements; BKC -70% of their requirements
18). USA mkt - Automotive OEMS - buying 90% from Canadian & USA producers; buying 10% from China; that too a Canadian supplier with China set up. labour there 3000$; here 8000 rs, manpower cost here 3-4%; in US maybe 15%
end prices are similar; 2-3% difference may be there;
19). Seat Assemblers
jci, lear corp, wagner - seat system assemblers for auto oems; approval comes from OEM; the vinyl goes from us but say wagner -does trim sourcing from somewhere else; so we are supplying to the trim suppliers;
20). Mercedes breakthrough - what does it take?
They have approived samples; Mercedes has done 3 audits last year; they cant introduce us in existing models; will introduce in new models; price negotiation starts 1.5 years before; last year we failed to clinch on the price; now we have better understood their system and pricing models; we hope to make something click within next calendar year
1 Like
Thanks Donald.
Along with the results, in the limited review, the Auditors have made some comments w.r.t. provisioning etc. Anyone knows what is the impact of this? Was it discussed in concall?
Excellent coverage of the Concall Donald.
I would like to add further some points.
1.Chines labour cost has increased and there is no significant cost benefits and differences between India and China.
2.Mayur is catering only 6- 7% of the requirements of OEM exporters and have huge scope to scale up. No worry as of now since they a have lot to scale up and garner.
3.All companies sell their products to a price. A lot depends on the cost management to increase the profits with that price.
4.183 6.2% (27%)
auto Replacement - 8.68% (46%)
furnishings 5.9%
5). After the 5th line capacity - 2.45 million
company confident of achieving scale in gen exports viz. bags, wallets,furniture,furnishings etc.
The American OEMs are not ready to buy even for 10 cents extra!!! they look for the quality that is available at the lowest possible price. No consideration given to any companies/Geography or regions.
Mayur can sell with the same quality and has got the expertise.
Mayur following the TPM/TQM Japanese model and have the technical capability and capacity which will be verydifficultfor any company in India to emulate as they are ahead by 1.5 - 2 years. Huge foresight indeed. So no fear of competition from India in the near future.
Also small correction in the company name is VKC and not BKC. They are the leaders in the south especially kerala.
http://www.veekesy.com/ Link: http://www.veekesy.com/
VKC and Paragon constitute 22-23% of the revenue.
VKC & Paragon sources 3-4 million metres from Mayur. Bata less compared to them.
VKC sources 70% of their requirements and Paragon sources 90%.
Bata has started outsourcing. supply only to bata and not to most of the outsourcers.
Huge competition is there in the market. However mayur is confident of achieving greater share.
Bullish on exports and expect good results in the next 6-7 months.
No price hike for this quarter.
Kindly let me know if i have missed/errored anything.
thanks donald and krishna for the prompt posting of concall details.
exports seems to be the next buzzword for mayur.
Thanks Donald & Krishna for quick update.
Donald from the point 5, 18 & 19 (pasted below for quick reference), I am not very clear how the Auto export market is shaping up. On one hand it says ford/chrysler business has shown growth on the other hand point 18 says Auto OEm buy from cananda, US and china. So basically what is the correct in terms of auto exports and what is the outlook.
Considering the increase in exports from expected 60 Cr to 80Cr, andMercedestalks and increasedinquiriesfrom abroad, looks like the stage is set for next leg of growth.
Also with just half a percent to one percent improvement in margins from the knitting fabric line at the expense of (25 cr capex??), is it a case of diworsification??
5). 183 cr - exports 42 cr so 22% in exports
chrysler/ford - 20.86% (83% growth over last year)
gen exports -3.5% (40%)
auto oem India - 6.8% (
footwear 52% (14%)
gen (reduced by 1.5%)
18). USA mkt - Automotive OEMS - buying 90% from Canadian & USA producers; buying 10% from China; that too a Canadian supplier with China set up. labour there 3000$; here 8000 rs, manpower cost here 3-4%; in US maybe 15%
end prices are similar; 2-3% difference may be there;
19). Seat Assemblers
jci, lear corp, wagner - seat system assemblers for auto oems; approval comes from OEM; the vinyl goes from us but say wagner -does trim sourcing from somewhere else; so we are supplying to the trim suppliers;
Hi Donald and Krishna,
Thanks for such prompt and well covered write up. Apparently, it seems business is likely to remain in sweet spot for some time now. Foresights of the management and efforts made by the company to break into auto OEM market in US is likely to result into big pay off in time to come. Also higher exports, vertical integration means higher margins for the company. In US, furnishing is also a big market and hence if company is able to make inroads there, it will open up new vista. In all, I think future looks good and company is delivering on numbers as well. As typically is the case for a wonderful business, intrinsic value compounds swiftly so as to make price look reasonable compated to value. In my opinion, for a longer term horizon, itfits intogrowth at reasonable price theme.
Thanks Krishna. excellent value-addition. truly appreciate…the spirit of collaboration:)
This combined coverage has it all, details and even small nuances:)
How do you take such precise notes, or you recorded the concall. Let me know, even this is a skill we can get better at.
-Donald
Thanks everyone for the updates.
Atul,
Re: Your questions
1). How is the Auto Export market shaping up? Not clear
The company maintains, the recent spurt in growth is mostly due to a sudden revival in US Auto OEM market in the last 3 months. Prior to that they were forecasting 60 Cr for the year. Now they are forecasting 80 Cr. They said they have also got breakthroughs with 2 importers from Europe - for general exports segment.
They are confident this is sustainable, and they will only grow in strength from here. They are not worried in the near future about export growth coming at cost of competition…because current share is negligible (compared to 90% share by US/Canada companies, and rest 10% from China & India; Chinese costs are at par with India, so they cant really undercut significantly). They can meet existing price points Rs 380/mt or so at the quality desired. New orders from Mercedez should come in by next year. A large US distributors is expected to finalise Furniture seg exports. Importers from Europe will also add volumes.
Growing Auto Exports OEM works to their advantage as it adds to the topline some 2.5x (than say local domestic sale), margins remaining similar.
2). Role of Seat assemblers like JCI. Lear, Wagner and Trim suppliers
Mayurs products have to be first approved by the OEM. Then the trim suppliers can also source from Mayur (the vinyl leather). Pricing negotiation terms are set by the OEM. You have to agree to a certain price band with the OEM, for a particular model’s specifications/requirements. Some negotiations must be happening at the trim supplier level.
We can try and understand this a bit better by posing this query to Management.
Dear Dhwanil,
Thanks for a good, concise summary.
1). That the company likes to under-promise and over-deliver is becoming very clear now to everyone. This is a very good thing to know about a company we are riding on
2). Yes, the Exports led growth is happening; capacities are lined up to cater to that; Low cost funds/internal accrual is available fro funding the growth
3). It’s certainly not cheap anymore (everyday). I concur with you that the intrinsic value curve keeps going higher for this company - so it is available at a reasonable price. just not sure at the moment, where to place it exactly in my GARP pile - for future allocations.
Will work in some of my projections and revert! I also intend to first take up a summary review of capital allocation for the top picks in my portfolio. Hopefully bring it to a state where I can communicate better, the decision-making framework behind the decisions.
If you are interested, we can share work on that front. I remember at some pointed you had raised your hand in working out a more comprehensive model.
Let me know.
Cheers
Donald
Atul,
I missed replying to your de-worsification point on the fabrics unit
a) this is badly needed to bring down rejection rate in export market - where imported bad quality fabric is currently used. If they can control the quality of the fabric, they are confident of bringing down rejection rates drastically. Which means in turn - they can scale up the Exports business faster.
b) a 1% margin cushion is good to have against rising RM/energy costs
c) I am pretty sure - once they stabilise this for a year or so for in-house, they will plan the next expansion for knitted fabric import substitution/and maybe even exports
Its part of the ‘foresight’ and ability to stay the course Management is known for, and they cited that as a strength (among others)in this concall - while defending why no competitor from domestic market will suddenly emerge - if the US OEM market is so huge.
Thanks Atul for the comments.
The OEM gets their business - 90% from U.S and Canada. This is where mayur wants to garner share. currently they are catering only 6-7% of their requirements and hopeful of making more. Vast market share lies before mayur.
With respect to Knitting fabric, they can nowguaranteeon the quality of the fabric at relatively low cost. Also poddar confirmed that the rejections rate can be brought down significantly and more value additions done on the final product at a cost which the U.S counterparts will find itdifficult.
When he says 1% margin expansion, that is the least and we can take more than that. He is very conservative when giving forward estimates. It is a value addition and definitely not diworsification.
andMercedestalks and increasedinquiriesfrom
5).
18).
Donald,
Thanks Donald for the comments.
I did not record since i was in office. I took a break and attended the call. I just had a piece of paper and kept on recording the important points.
The biggestmotivatingline was when poddar said to one analyst that " I will try to work**honestly **and create value."
collaboration
nuances
Excellent coverage of the Concall Donald.
I would like to add further some points.
What a nice n honest first concall .I listened intently to the same n almost all the points hv been covered.Mr Poddar appeared very honest,n knows his business like the back of his hand.
What I also liked the coverage n questions by Franklin Templeton guy Mr Mehta who raised lot of pertinent questions.Theotherqueries were raised by Moneyworks4 me,Anand rathin one more research house Canatbil capital n MC investment.Any views ontheseresearch houses>
Any news of any institutional holding in Mayur?
The knitting facility wud definitely help in reducing rejection rates in exports where the focus wud increase.Mr SK Poddar deeply thinks n then take decision.
Whats everybodys take of not taking any hedge ? I liked the decision
But poor Manav never got the opportunity to speak.LOL
Hi Everyone,
Fabulous capture of call proceedings. This was first ever conf call i attended thanks to Ayush’s tweet In future, can we post the info about calls in advance at valuepickr ? So, that more ppl from our forum can join the call. Pity that no company sends the conf call details to shareholders in mail in advance.
I must say, it was a very good experience for me as I got some goodlearning’sabout the many moving parts of a business.
So, here are my small additions: Hope there are very littlerepetitions.
1). Inquiries take a long time to convert to sales. 10-12 organized player globally.
2). Reason for Higher than guided revenue for first half year- cracked 2 importers in last quarter which can be treated as a long term trend. @Donald, Now i wonder if i heard this point wrong ? because you both missed it
3). 360 cr. guidance, 189 cr in first half. Can the whole year guidance be improved ? - Next 2 month’s production will be down because of diwali and vacations. May be revised to 370 cr revenue guidance, on lower side.
4). Question on BMW - We have been working on it for last 2 yars. hopeful for it by next calender year. Once it clicks it clicks, additional revenue is easier to get. First time is difficult.
5). Impact of US Auto Market slowdown - May be a problem for player who are supplying 60-70%. Mayur currently supplies only 6-7% of the market and much scope for improvement on this percentage due to lower cost.
6). Dividend Policy - 20-25% of net profit. Unless there is big capex planned. They are keen to utilize the TUFF scheme as highlighted by Donald.
7). Margin on sequential basis have come down by 2% because of increases in raw material prices. Also power prices have gone up by 8-10% also the coal cost (to run boiler).
8). Rejection rate and Fabric unit - Rejection is caused mainly due to fabric quality. Will see improvement on this front from next quarter. May result in 0.5 to 1% increase in margins. Fabric cost is 15-20% of raw material cost ? Total 3 kinds of fabrics used with knitted fabrics being 70%, the unit will supply the most of the knited fabric requirement. Rest 2 types of fabric are cheaper and will continue to be imported.
9). Company is a price taker in Auto OEM market, because the buyer have multiple suppliers. Whereas for the footwear market, company can set the prices because of quality, design, longer relations with client etc…
10). Promoter was mostly all praise for Mr. Ram Dash Acharya, who has joined as SVP. He has knowledge of US market and makes client visits.