Mayur Uniquoters Q4FY22 Highlights

Operational Highlights

Mayur Uniquoters Ltd being a market leader in the synthetic leather industry and an organised player has been able to leverage the emerging opportunity and deliver exemplary performance in the past year both in national and international business markets.
In the second half of FY22 the automakers still faced production problems due to shortage of semiconductor chips. Because of this the OEM export sales are impacted in the quarter. However Mayur is hopeful to regain the OEM sales & demand from the international market after 4-5 months.
The endeavor of the company is to make the company a preferred supplier for the leading OEM especially in the US and European region.
The company has already been approved by Mercedes Benz in South Africa, BMW and Volkswagen in India. Supply is also started for Mercedes and Volkswagen for their new models. The product supply to BMW is expected in Jan 2023.
The company has entered into the sale agreement with Backsen India for the product supply to Kia and Hyundai motors in India as well as the global market.
Regarding the PU plant almost all the project activities are completed now except some small civil and site development work.
The company has decided to put up a PU plant which is expected to be completed in the current financial year.

Financial Highlights

The company has achieved revenue from operations on a standalone basis amounting to Rs 147 Crores which has decreased by 13% from the last quarter.
Standalone PBT stood at Rs 25.5 Crores and standalone PAT stood at Rs 19.5 Crores in the quarter which has decreased by 12% and 13% respectively from the last quarter.
Revenue from operations on consolidated basis is Rs 162 Crores which has decreased by 10% from the last quarter.
PBT on consolidated basis is Rs 33 Crores and PAT on consolidated basis is Rs 25 Crores which has decreased by 5% and 4% respectively from the last quarter.

Q&A Highlights

Semiconductor chip shortage has been going on since last one year. Whatever projection they have given as far as Mercedes Benz is concerned is quite low, not even 50% but from the last 2 months it is doing very well.
Volkswagen India is doing ok business. Whatever they have said they are buying.
Aftermarket was a very big market. Mayur was doing 7 lac meters per month. But in Q4FY22 it is not more than 3-3.5 lac meters per month.
Government has made airbags compulsory in all cars. Because cars are being fitted with airbags it becomes difficult to put up a seat cover on it. They are working on it to find some solution. Because of this problem in the aftermarket, Mayur’s profit is down by 6%.
In Q4FY22 the volumes were down but in Q1FY23 there is an improvement. In Q1FY23 volumes increased to 30,000 from Mercedes Benz.
The volumes which were down from 7 lac meters per month to 3-3.5 lac meters per month are back to 4-4.5 lacs meter per month in the current quarter (Q1FY23).
Volume in FY22 was 2.48 Crores which grew by 7.5% from the last year and value wise it increased by 26%. In FY23 it should increase by 15-20%.
Footwear segment was down since GST was increased from 5% to 12%. In Q4FY22, the sale from the footwear segment was very down. Now it is improving. Footwear segment sales were more down as compared to automotive sales.
PU sales in FY22 is 27 Crores and volume was around 8 lacs.
There is a lot of manipulation in imports. All these traders import PU from China. $ 2 material they are importing at 40-50 cents. Govt has put an anti dumping duty on PU of 46 cents. 46 cents anti dumping duty has been placed on PU imports and has already started from 25th May 2022. Now the gap will reduce considerably. Earlier the gap was Rs 60-70 gap. Still Mayur was managing with good customers. Now the gap is reduced to Rs 30-35. Management expects sales to increase by 30-40% in FY23. And if things go well then in FY24 Mayur may be able to reach the full quantum.
China is making a huge quantity of PU and that’s why their cost is much lower. Mayur is working very seriously in manufacturing PU chemical also.
In PU Mayur is running one shift. As soon as they start running the second shift they will order for more PU lines. Mayur will have to just order the lines and install it, rest everything is ready. In 6 months Mayur will be able to start the second line of PU.
In FY23 Mayur is planning to do capex of Rs 51 Crores- 50% of this will be spent on putting the PU plant (warp knit plant) in Morena. Remaining will be incurred in Dhodhsar plant for some capex activities, embossing and some other activities which will add value.In FY22, 47 Crores capex was incurred in Dhodhsar plant for putting up one printing line, one embossing line because Mayur has put up one coating line which has already started so to fulfill that you have to have printing, embossing and then perforation. These three new machines Mayur has put up in FY22.
Mayur has got 47 circular knitting machines.
Mayur is putting a warp knit plant in Gwalior because in PU most of the material is warp knit so they have ordered for the machine of warp knit also. In 9-10 months Mayur will start that.
PU production is not that big. Mayur is working on having a JV with some of the PU chemical manufacturers but the main problem is the quantity. After this anti dumping duty Mayur is hopeful that in the next 2-3 years time the quantity will increase.
Consumption in India is 90% PVC and 10% PU.
PVC is not imported in India because the cost benefit is not there.
95% of PU is getting imported.
There are 4 PU manufacturers in India including Mayur. All the 4 players together are not even making 5% of the requirement of PU in India. That means if the requirement is 100 meters, 5 meters is produced in India and 95 meters is imported. Main reason is the prices. Maybe this 5% will increase to 15-20%. Within 4-5 years maybe PU will also be wiped out.
In FY22 raw material price increased by 6%.
Mayur has entered into the sale agreement with Backsen India for the product supply to Kia and Hyundai motors in India as well as the global market. They have a very good relationship with Backsen because the Korean companies always keep a Korean person in between. They don’t deal directly. Volumes from Kia and Hyundai are expected to be between 20-30k per month.
In Korea there is no import duty.
Other income in Q4FY22 is around Rs 7.5 Crores as compared to Rs 2-3 Crores on a regular basis.

Reason: Other income is high because of the fluctuations in the foreign exchange and Investment Income.

Mayur is making wet PU in Gwalior. Mayur has got an approval from Chrysler company in the US for their Malaysian plant and that is more than $20. Some trial orders have been executed of 700 meters. Maybe in the next 3-4 months Mayur will start selling them atleast 15-20k meters.
Mayur is working in all the fronts- PVC, high solid PU and wet PU. Mayur is selling high quality material.
High solid PU is for the Automotive market and not for the general market because it is very expensive and almost double the price as compared to wet PU. There are only two manufacturers of high solid PU- One is in Europe and one is in Japan. Because the prices are so high it’s not that it can be used like PVC. Casually they are putting up and they are replacing genuine leather.
Mercedes is replacing leather in their high quality cars also.
In the automotive industry, there are three kinds of leather- genuine leather, artificial leather and fabric. In some cases fabrics are also replaced by artificial leather.
In some cars wet PU was used and backsen were supplying to them. Now to reduce the cost they have gone to high quality PVC whose price is 30-40% less as compared to wet PU.
Geographical Revenue Breakup:

Domestic: 77%

Export: 23%

Capacity Utilization

PVC 65%

PU 25%

Mayur is going to reduce some prices from 1st june 2022 because PVC resin and plasticizer is falling. But the way it has increased it cannot be decreased like that because the main problem is the power and fuel prices has been increased. Coal prices have increased 2.5 times.
Margins will increase this year.
Wherever genuine leather is used, synthetic leather is a replacement. Mayur is selling B2B and not B2C. B2B you are dependent on your buyer who is making the final product. Suppose if you want to change the furniture of the house, You go to the interior decorator, he takes you to the shop & there he shows you the samples and then you buy. So Mayur Uniquoters has made this subsidiary- Mayur Textiles to go to the retail customer directly. Even if somebody wants 10m or 20m Mayur will sell but the price will be high. To be in touch with B2C customers Mayur has formed this subsidiary. Mayur has already made 6-7 lines. Maybe from July end they will start distributing. In PVC leather cloth whatever artificial leather is used 50% of that is consumed in furnishing i.e., chair, sofa, restaurants etc. So there is a huge market for this. There are 180 dealers all over India and Mayur is starting with the north. Mayur has an idea of having around 1000 dealers all over India gradually.
Succession planning: Mayur has a very good CFO. Now Mayur has appointed a very good COO who has handled 18 companies earlier. And gradually Mayur will go for CEO also. Now Mayur is working on how it can be professionalized