I-direct Instinct - Mayur Uniquoters

Mayur Uniquoters (MUL) is a leading player in the domestic technical textile industry, manufacturing artificial/synthetic leather for a wide variety of applications viz. automotive (seat upholstery, inner linings), footwear (shoes/sandals insole, uppers), furnishing and apparel. It has the capacity to manufacture ~3.7 crore metre/annum of polyvinyl chloride i.e. PVC artificial leather & ~0.7 crore metre/annum of polyurethane (PU) artificial leather. It is a quality franchise with proven capabilities, which is highly capital efficient in nature, commanding strong double-digit margins and been a consistent CFO generator with net cash positive B/S.

Triggers

Growing automotive share to fortify ASPs, margins

Auto segment forms ~55% of revenues while footwear forms ~30%, with others contributing rest. MUL counts several major automotive OEMs both in India (MSIL, M&M, TML, MG Motor, Honda), globally (VW, Ford, Chrysler) as its clients while also serving retail brands like Bata, Relaxo, Paragon, among others. Share of footwear in overall revenues is on the decline amid higher growth in auto, other segments. This bodes well for MUL as footwear ASPs are lower than those in automotive with blended ASPs at ~Rs. 200-220/metre. Recently, receipts of approval from Mercedes (South Africa), import substitution win from Volkswagen India, on boarding progress with BMW showcase MUL's efforts in this direction. Continued rise in share of automotive segment would further support ASPs, margins.

Strong financials provide additional comfort

MUL exhibits strong financial discipline with net debt free B/S, large net cash reserves on books (~Rs. 160 crore as of FY20) and a track record of consistent cash generation (positive CFOs, present CFO yield at ~5%) while also boasting strong capital efficiency (average RoE in FY12-20 at ~26%, average RoIC over FY12-20 at ~56%) as well as best-in-class margins (average EBITDA margins at ~20-22%).

Valuation & Outlook

Increasing share of automotive business, stable crude oil prices, general focus on value addition and robust financials bodes well for MUL. Accordingly, we assign BUY rating to the stock, valuing the company at Rs. 350 i.e. 20 FY20 EPS of Rs. 17.6.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirectInstinct_MayurUniquoters_Aug20.pdf

Shares of MAYUR UNIQUOTERS LTD. was last trading in BSE at Rs.307 as compared to the previous close of Rs. 298.85. The total number of shares traded during the day was 30896 in over 1342 trades.

The stock hit an intraday high of Rs. 307.2 and intraday low of 292.45. The net turnover during the day was Rs. 9254570.

Source : Equity Bulls

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