Thanks a lot Hitesh.
Good results from Mayur. Here are conservative projections, this will be refined after the next update with management. I can't but marvel when I look at the record of this company!
| Mayur Uniquoters | 2007 | 2008 | 2009 | 2010 | 2011 | 2012E | 6yr CAGR | 2013E | 2014E |
| Growth | 36.42% | 18.02% | 44.60% | 48.91% | 27.73% | 30.00% | 30.00% | ||
| Total Sales | 71.7 | 97.81 | 115.44 | 166.93 | 248.56 | 317.48 | 34.66% | 412.72 | 536.54 |
| Domestic | 103.10 | 150.21 | 200.28 | 235.00 | 288.91 | 375.58 | |||
| Exports | 12.34 | 16.72 | 48.28 | 82.48 | 123.82 | 160.96 | |||
| Segment Contribution | |||||||||
| Domestic | 89.31% | 89.98% | 80.57% | 74.02% | 70.00% | 70.00% | |||
| Exports | 10.69% | 10.02% | 19.42% | 25.98% | 30.00% | 30.00% | |||
| EBITDA | 6.67 | 10.56 | 11.78 | 27.92 | 40.87 | 54.20 | 52.04% | 70.16 | 91.21 |
| EBITDA Margins | 9.30% | 10.80% | 10.20% | 16.73% | 16.44% | 17.07% | 17.00% | 17.00% | |
| Depreciation | 1.52 | 1.39 | 1.59 | 2.08 | 2.67 | 3.87 | 5.37 | 6.98 | |
| Depreciation/Sales | 2.12% | 1.42% | 1.37% | 1.25% | 1.08% | 1.22% | 1.30% | 1.30% | |
| EBIT | 5.15 | 9.17 | 10.19 | 25.84 | 38.19 | 50.33 | 64.80 | 84.24 | |
| Interest | 1.2 | 1.17 | 0.74 | 0.60 | 0.70 | 1.14 | 1.49 | 1.93 | |
| Interest/Sales | 1.67% | 1.20% | 0.64% | 0.36% | 0.28% | 0.36% | 0.36% | 0.36% | |
| PBT | 3.95 | 8 | 9.46 | 25.24 | 37.50 | 49.19 | 65.60% | 63.31 | 82.31 |
| Taxes | 1.3 | 2.89 | 3.40 | 9.02 | 12.23 | 15.82 | 20.89 | 27.16 | |
| Tax rate | 32.91% | 36.13% | 35.91% | 35.75% | 32.61% | 32.16% | 33.00% | 33.00% | |
| PAT | 2.65 | 5.11 | 6.06 | 16.22 | 25.27 | 33.37 | 65.97% | 42.42 | 55.14 |
| Net margins | 3.70% | 5.22% | 5.25% | 9.71% | 10.17% | 10.51% | 10.28% | 10.28% | |
| # of Shares | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | |
| EPS | 4.90 | 9.44 | 11.20 | 29.95 | 46.69 | 61.65 | 65.97% | 78.36 | 101.87 |
| EPS growth | 92.83% | 18.64% | 167.47% | 55.85% | 32.05% | 27.11% | 30.00% | ||
| P/E | 10.69 | 8.09 | 6.37 | 4.90 | |||||
| P/Sales | 1.09 | 0.85 | 0.65 | 0.50 | |||||
| DPS | 1.39 | 1.85 | 3.53 | 5.01 | 10.01 | 13.50 | 57.67% | 17.16 | 22.31 |
| Dividend Yield | 2.71% | 3.44% | 4.47% | ||||||
| Dividend Payout | 28.30% | 19.57% | 31.51% | 16.71% | 21.45% | 21.90% | 21.90% | 21.90% |
Return on Capital at ~60%, ROE at ~42%, Working capital/Sales has dipped under 10% for the first time. company keeps getting more efficient over time. The knitting facility should start adding to margins in FY13
I am adding at these levels and will add more on declines.
Disc: Mayur has upwards of 25% stake in my portfolio, and I may be biased. Please do your own due diligence!
thanks donald for the updates. the projections seem on track.
great company and great results. looks a good buy even at 500 levels.
Donald Ji,
You say- “Mayur has upwards of 25% stake in my portfolio” and then you say- “I am adding at these levels and will add more on declines”…
CanI conclude that Mayur is the best pick in the market, according to you?Can I also conclude that nothing (almost nothing) cango wrong for Mayur?
Disc- Around 10% of my portfolio & I am also bullish on Mayur.
Hi Jatin, Although your question is for Donald, my 2 cents worth…
I have 13.5% of my portfolio in Mayur, and continue to search for potential problems. Other than global uncertainty like Eurozone collapse, severe trade embargoes from the developed countries, severe dollar depreciation, natural calamities (earthquake/tsunami etc) and dishonest (aka Satyam) it seems that Mayur is in a sweet spot. What percentage of portfolio it merits to occupy will depend on your personal risk perception. Personally, I would prefer to be below 20% in any one stock. More than that and I can be susceptible to _force majeure_conditions.
Mayur is definitelyamongthe best investment ideas discussed here, if not the best. Above 40% ROE, Income and PAT growth of 36% and 65% over the last 6 years, 32 cr of free cash flows over the last 5 years - this company just looks class apart from the rest. And all this has to be genuine given the high dividends the company is paying (7.3 cr in FY 2012). And still the valuations are at reasonable levels.
On working capital to sales, if we take out cash and consider just non-cash working capital to sales ratio - its only 3.7%, absolutely amazing 
What I understand is that even though the technology is not that difficult to get (already some 15 players are in synthetic leather business in India),Mayur is able to manage production and operations extremely efficientlywhiledelivering superior quality.Further, Mayur has so far managed to scale up rapidly whilemaintainingthe quality and grow bydeployingvery littleadditional capital. It would be very hard for a domestic player to achieve such productionefficienciesand compete with Mayur. The only threat I can see is from global players (but again the size of opportunity is huge) or due to some negative macro events (very difficult to predict).
Hi Jatin,
Sorry I missed this earlier!
1). For the last time…drop the ji…my exp is v v limited …just 6 yrs now…still v bookish
2). Allocation depends on your personal situation and risk profile, yes. But to me most important is how much CONVICTION do I have vs the Valuation. I have done all the homework I could… I have challenged analysts and friends all over the country to show me another business with similar economic metrics and similar valuation with similar opportunity in front…I have visited the factory…with Naga the 2nd time…the guy who did the real spadework by visiting the company…we spent over 6 hours…we talked with the new professional recruits…saw the buzzing plant…the processes in the company…talked top people on the shop floor…and even they could articulate the vision of the company…clearly. CONVICTION is very high post that…and they have always walked the talk…are extremely grounded… the dividend policy was enunciated to us…unlike most other small companies professing no dividend policy…
3). NO RISK NO GAIN. So the question I ask is. What are the odds on this Management and Business delivering for the next 2 years… Till now I always found the odds are stacked in favour…also business cycles are there in every industry…but does this company have it in them to do better than industry…and manage the environment better? Are they grounded…prudent enough? do they look like guys who may throw caution to the winds…or ?. Do they have the Management BW to go to the next level. This was answered emphatically YES, when we met the professional recruits in 2011…and heard them talk about the company.
4). Things can always go wrong…but do we track the stock diligently… there are guys I know who have 40% staked on Mayur…and most of my experienced friends have upwards of 10% allocations…if something is going wrong…we have the confidence…we can track that …now the outlook has changed…and if it changes …so does our allocation profiles.
5). Incremental Allocations - are based on Opportunity Cost of my Capital. If I can find better long-term portfolio contenders…Sure. At the moment I can’t…and I really don’t have an Allocation limit in mind…That’s not a prudent choice perhaps…but I am also learning…so far in last 3 years…this credo has worked well…if I see different results… I reserve the right to change my views and allocation profiles!
-Donald.
PS: 1. To maintain high allocations, its imperative to see things for yourself, talk with management, see their confidence, the passion in their eyes, their intent…stock price or business…their groundedness…all emerges if you prepare well and quiz them well!
2). It is usually not possible to develop that level of CONVICTION from desk research/ or from Friends’ convictions. Unless you are very very smart…with a refined gut feel …like Hitesh Patel… he does 20% of the work we do and does better capital allocation than all of us put together…but then he is truly gifted! Others, like you and me can take the trouble of hard work:)
CanI you?Can cango
Mayur Uniquoters - Management Update brief
Surce: another of those good samaritan ValuePickrs...extremely diligent in his follow-up ...but chooses to be in the background!
Views on the company remain unaltered. I am a buyer at these levels and on declines
Disc: My views can be biased. Pls do your own due diligence
Key Highlights:
1. Export performance - 55 Cr, has not met plans. Reasons -refusing lower margin business, which if taken could have crossed 100 Crs. Expects export to grow at 15% for FY13 [I would like to quiz Management further on the progress on Ford & Chrysler relationships..and why that is not being scaled up...as per expectations]
2. Margins in Q4 were extraordinary - some export promotion scheme they could take advantage of and Forex gains. Not sustainable... FY13E EBITDA margins ~16%
3. Company expects to maintain margins at these levels - effected a price hike of 5% across all products.
4. New Line 5 will be available only in Feb 2013.Commerciallyin FY14E only
Updated Conservative Projections as below.
[If you ask Nagabrahma, he will have better numbers - he quotes, "Company has a habit of underpromising and over-delivering"]
Projections
| Mayur Uniquoters | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 6yr CAGR | 2013E | 2014E |
| Growth | 36.42% | 18.02% | 44.60% | 48.91% | 27.73% | 26% | 25.00% | ||
| Total Sales | 71.7 | 97.81 | 115.44 | 166.93 | 248.56 | 317.48 | 34.66% | 400.00 | 500.00 |
| Domestic | 103.10 | 150.21 | 200.28 | 235.00 | 340.00 | 400.00 | |||
| Exports | 12.34 | 16.72 | 48.28 | 55.00 | 60.00 | 100.00 | |||
| Segment Contribution | |||||||||
| Domestic | 89.31% | 89.98% | 80.57% | 74.02% | 85.00% | 80.00% | |||
| Exports | 10.69% | 10.02% | 19.42% | 17.32% | 15.00% | 20.00% | |||
| EBITDA | 6.67 | 10.56 | 11.78 | 27.92 | 40.87 | 54.20 | 52.04% | 64.00 | 85.00 |
| EBITDA Margins | 9.30% | 10.80% | 10.20% | 16.73% | 16.44% | 17.07% | 16.00% | 17.00% | |
| Depreciation | 1.52 | 1.39 | 1.59 | 2.08 | 2.67 | 3.87 | 5.20 | 6.50 | |
| Depreciation/Sales | 2.12% | 1.42% | 1.37% | 1.25% | 1.08% | 1.22% | 1.30% | 1.30% | |
| EBIT | 5.15 | 9.17 | 10.19 | 25.84 | 38.19 | 50.33 | 58.80 | 78.50 | |
| Interest | 1.2 | 1.17 | 0.74 | 0.60 | 0.70 | 1.14 | 1.44 | 1.80 | |
| Interest/Sales | 1.67% | 1.20% | 0.64% | 0.36% | 0.28% | 0.36% | 0.36% | 0.36% | |
| PBT | 3.95 | 8 | 9.46 | 25.24 | 37.50 | 49.19 | 65.60% | 57.36 | 76.70 |
| Taxes | 1.3 | 2.89 | 3.40 | 9.02 | 12.23 | 15.82 | 18.93 | 25.31 | |
| Tax rate | 32.91% | 36.13% | 35.91% | 35.75% | 32.61% | 32.16% | 33.00% | 33.00% | |
| PAT | 2.65 | 5.11 | 6.06 | 16.22 | 25.27 | 33.37 | 65.97% | 38.43 | 51.39 |
| Net margins | 3.70% | 5.22% | 5.25% | 9.71% | 10.17% | 10.51% | 9.61% | 10.28% | |
| # of Shares | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | 0.54132 | |
| EPS | 4.90 | 9.44 | 11.20 | 29.95 | 46.69 | 61.65 | 65.97% | 71.00 | 94.93 |
| EPS growth | 92.83% | 18.64% | 167.47% | 55.85% | 32.05% | 15.16% | 33.72% | ||
| P/E | 10.41 | 7.88 | 6.85 | 5.12 | |||||
| P/Sales | 1.06 | 0.83 | 0.66 | 0.53 | |||||
| DPS | 1.39 | 1.85 | 3.53 | 5.01 | 10.01 | 13.50 | 57.67% | 15.97 | 21.36 |
| Dividend Yield | 2.78% | 3.29% | 4.40% | ||||||
| Dividend Payout | 28.30% | 19.57% | 31.51% | 16.71% | 21.45% | 21.90% | 22.50% | 22.50% |
Mayur announces bonus !
And the stock goes up by around 8%. I dont know this fascination with bonus. It hardly changes anything on the fundamental front. Only thing it is likely to do is increase the liquidity.
**
Not Complaining at all :))
Mayur announces bonus !
And liquidity.
**
Donald,
Remember what one of the senior investors said earlier when we were talking on liquidity, low liquidity of a stock, can we get out etc., (and thanks to you for mentioning it) (and I forget that thread where it was mentioned) -
"Don’t worry about liquidity. Once the company reaches 500 cr of Sales or 100 cr profits whichever is earlier, liquidity will sort out for itself’
Golden words.
Hi Kiran,
I remember “Liquidity will sort out by itself…” statement too…can’t locate immediately. …probably from the Capital Allocation thread
Liquidity Impact
I asked him “What about illiquid stocks with low average trading volumes? Our kind of stocks have an impact cost in entry and exit.” He said "In my experience, stocks with strong fundamentals, good growth and low liquidity has actually worked to my advantage, most times! Low liquidity shouldn’t matter, if you are invested for the long term.
**
Not Complaining at all 
)
Mayur announces bonus !
And liquidity.
If I am not wrong, Bonus helps in Tax Savings. If we buy stock was 200, and we have a 1:1 bonus. Assuming efficient markets, the price drops to 100.
As per Income Tax Act : Cost of Acqusition will be 200, less Cost of sale : 100. We have a capital loss of 100.
For the Bonus shares, if we will have Cost of 0, and Sale price of the date of sale. So we have a huge capital gain. Here, however the catch is, if we keep this stock for more than a year, we can book a long term gain which is exempt !!!
**
Hello Ashwini,
What you have mentioned is called “Bonus Stripping” in tax parlance. And this very loophole has been plugged in IT rules a few years back.
Income tax Sec 94(8) Wherea
(a) any person buys or acquires any units within a period of three months prior to the record date;
(b) such person is allotted additional units without any payment on the basis of holding of such units on such date;
© such person sells or transfers all or any of the units referred to in clause (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b),
then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date of such sale or transfer.]
_Explanation._aFor the purposes of this section,a
(a) ainteresta includes a dividend ;
38[(aa) arecord datea means such date as may be fixed bya
(i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or
(ii) a Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the Explanation to clause (35) of section 10, for the purposes of entitlement of the holder of the units to receive income, or additional unit without any consideration, as the case may be;]
(b) asecuritiesa includes stocks and shares ;
(c) securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or in the manner in which they can be transferred;
39[(d) aunita shall have the meaning assigned to it in clause (b) of the _Explanation _to section 115AB.]
So there is no bonus stripping anymore.
Regarding Mayur and bonus issue, this can have far reaching impact for a severly low liquidity stock like Mayur.
This may offer the window of opportunity to large fund houses, to enter this scrip. Since the promoters own 75%, only a large liquidity enabled by a liberal bonus may allow domestic institutions to take position.
rudra shankar chaudhary,
according to the bonus strapping thing mentioned by you,
What happens if the stock has been acquired three months before record date?
I guess then there would be benefit of bonus strapping.
Not sure though.
Hiteshji,
the rule says about buying 3 months before record_date to selling within 9 months of record date, meaning you are barred of bonus stripping.
If you notice, the hectic activity for bonus stripping starts after declaration and final record date is wihinn 3 months from that. So this section effectively curbs all speculative action and bonus stripping.
For someone who had acquired before 3 months, he was not aware of bonus anyhow. Also he cannot take advantage if he sells with in 9 months of record date, in effect it becomes his long term holding (3+9=12 mnths) and hence no one can take advantage of bonus stripping.
Hope this helps.
ps: everyone’s missing you on TED. yours truly included . (prudentinvestor)
Didn’t they have a meeting some time last year to discuss and decide the listing of shares on the NSE? I don’t think anything came out of it…
Point being, this bonus issue thing might die its own death in a couple of days. And the point regarding liquidity for investors etc. is crap. Nothing changes if one wants to acquire a certain % of the company or to give a company certain weight in one’s portfolio. Buffett has written amply about why he wont issue bonus shares or split etc., and most of the investors across the world will agree.
Of course, long term investors/speculators might buy at 5-600 levels, but unless you know the inside news, dont put fresh money expecting a quick buck. In case this goes beyond 700, one should exit completely to make an entry later.
In my opinion, there is a small window for this bonus stripping still left. You can buy before the bonus (within the 3 month period) and sell 9 months after the bonus issue.
Though it might not make much sense for Mayur, because if it already doubles in price by then you don’t have the tax advantage, but forget it… you have doubled your money.
Also I have observed (could be an illusion) a drop in stock prices 9 months after the bonus issue. This again could be used by investors to pick their stocks just because others are interested in saving taxes.