Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mayur Uniquoters Limited Q3 FY '20 Earnings Conference Call hosted by Monarch Networth Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anubhav Rawat from Monarch Networth Capital Limited. Thank you, and over to you, sir.

Thank you. Good evening, everyone. On behalf of Monarch Networth Capital, I welcome you all to Quarter 3 FY '20 Earnings Conference Call of Mayur Uniquoters Limited. We are pleased to host the senior management team of the company. Today, we have with us, Mr. Suresh Kumar Poddar, Chairman and Managing Director of the company; and Mr. Vinod Kumar Sharma, CFO of the company. He will start the call with initial comments about the results and outlook of the company, and then we will open the floor for question and answers. Now I would request Mr. Suresh Kumar Poddar, Managing Director of the company, to give his opening comments. Over to you, sir.

Good evening, everybody, and good luck to all of you. Now we'll start reading the results. My CFO will read it. Yes, go ahead.

Yes. Thank you, sir. Good evening, dear investors and analysts. Ladies and gentlemen, it's a great pleasure to be here to share with you the performance of Mayur. Thanks for giving your precious time to join Mayur Uniquoters Limited Q3 FY '20 Conference Call. Mayur Uniquoters Limited being a leader in the synthetic leather industry and an organized player has been able to leverage the emerging opportunities and deliver exemplary performance in past years, both in national and international business markets. The current market scenario of automotive industry has affected our Q3 performance also and sales revenue decreased by 22.52% as compared to previous year's quarter, mainly because of the ever-worst fall in India's car market in last 8 years and sluggish demand in our footwear market. However, we observed a small rise in the automotive market from December month and in other segments also. And we are now expecting a good sales volume due to increased demand in automotive market and its impact can also be seen from the industry performance in current quarter of FY '20, that is in Q4. And your company has been with a very good track record of being an investor-friendly company, and it is committed to drive value creation for all the shareholders. Now I'm glad to tell you that the Board of Directors of your company have declared interim dividend of INR 1.5, that is 30% for Q3 of financial year 2019/20. Now I would like to start with financial highlights for Q3 FY '20 under review. We will reply your queries after our review on the financial results. Your company has achieved revenue from operations on a stand-alone basis, amounting to INR 124.61 crores. This is a little increase by a 33.33% as compared to last quarter. And net profit after tax, PAT, amounting to INR 18.19 crore, which is -- from the figures, it's showing a decline of 9.13%, but in fact, if we consider the absolute figures of tax provision in last quarter then it's an increase of 13% over the last quarter. Also, the revenue from operations on consolidated basis is INR 138.61 crores, which is 5.88% increase as compared to last quarter and PAT amounting to INR 23.29 crores, which has increased by 6.28% over the last quarter. Further, the endeavor of Mayur is to be preferred supplier for the leading OEM, especially in U.S. and European regions, and we are glad to update that your company is already approved by Mercedes-Benz for supply to their South Africa plant and further supply is expected to start for their new models from Q4 of next financial year 2021. Moreover, our product approvals from BMW is also under progress. Also in FY '21, we are expecting very good and higher sales volume in both OEM export markets and domestic markets. And export markets, we expect 20% to -- 20% increase and domestic market, we expect 10% to 15% in the coming quarters for automotive. Now I update on our CapEx plan. PU Plant, most of the project construction activities are completed with the commissioning of wet and dry lines of PU Plant. Trial line -- we have done trial run of PU Plant in December month and also we started commercial operations in last month. Small supply orders also started from the plant. Now expecting production stabilization at the plant within the next 2 months for regular and large quantity of supply orders. While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities to assist society and our corporate social responsibility program, the company has adopted many HE schools for education of children. Your company has worked on education, especially for the girls and underprivileged child education, various health care initiatives, especially child skill development, water for all, sanitation at school area, distribution of books, bed, clothes, blankets and, most importantly, family planning and family welfare schemes. The Government of Rajasthan has recognized these initiatives on various platforms and appreciated our activities done on CSR front. I'm thankful to all the investors for their valuable time, to those who became the part of this conference call. And with this positive note, I would like to conclude and request you all to open the form for request. And before that, I would request that due to time constraints, we need to end this call by 6 or 6:10 p.m. sharp. We, therefore, request you to kindly avoid the repeated questions during the call and considering competition, we will not discuss volume data. Please avoid volume-related query. If anyone wants, they can send us mail, we will reply all mails. Thank you. Now open for questions and answers.

[Operator Instructions] The first question is from the line of Niteen Dharmawat from Aurum Capital.

My question is related with raw material. So is there any dependency that we have on Chinese market for any of our raw materials? Just wanted to know that first.

So far our PVC leather cloth is concerned, we are not dependent. Because all PVC, resin, plasticizer all we are buying from western countries and fabric, we are manufacturing ourselves. We are not dependent at all.

Got it. And you mentioned about some green shoot that you saw in demand in the month of December. So how is January going right now? And especially the export market, how is it happening now? And within domestic, how is the footwear market is going for us?

You see, as I told you, that December is good. January is -- also looks good. And hopefully, this quarter should be better and the demand is picking up. More so over automotive demand is picking up, not because they are producing -- started producing big quantity, but because of our approval of 3, 4 new supply -- buyers. That's why our sale is increasing. And hopefully, the market has started reviving, and that will also help us. And we hope for a good result in the future.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

Happy to see that we are maintaining our margins and revenue as well in tough times. Sir, if I look at your commentary, you are more focused on exports in auto and footwear continued to see pressures, as you have rightly mentioned in the previous calls as well. Now if I look at historically, we are currently at -- 30% of our volume is coming from footwear, and we are trying hard in exploring other segments, like exports, OEM and replacement. Still this is a very large chunk, which is not growing. How do you see -- how incremental revenue or demand from auto and exports will replace this footwear volumes?

You see, if you go back 5 years back, and you will find that footwear business was about more than 45%, which has come down to 30% and still the sales are increasing and profits are increasing. Now whenever you sell anyone, it is very important to have a good margin as well as security of the money. After demonetization, the market position is not very good. So we are very strict to supply those who are good paymaster. And we are getting good results from them. December and January, we had improvement in footwear segment also. And now we hope that including footwear, automotive will also increase. And now today's scenario, automotive sales is expected to grow more than footwear. That's the reason I've told you. But still in automotive, we are dealing with the models, which has got high quality and high price. So our endeavor is now to start making good quality, which we have been doing and technical products. That's why I've started this PU plant, which will smooth from, maybe, middle of March. And there also, we are planning to go for good material, which is technically strong, and we want to create an impression that you don't need to go to China. We are here to support you and our OEM manufacturers of footwear, they are not in PU, because they have worried that if there is any quality complaint, whom they will get caught. So with our this thing -- because there was -- just recently there was exhibition -- footwear exhibition in China. We have displayed our PU material and everybody liked, and I'm very particular about quality, I've said not a single meter should go bad because I want to create a good name of Mayur in the beginning. No matter if the sales is less, but actually, it will pick up. Because there is a huge import from China. So I'm not worried about sales that much. Now main thing is how we are able to make a good profit. And in PVC also, the sales has started to increase in footwear.

The initial trials in samples you created, you are satisfied with the product output, right, from the plant?

Of course, I've got 4, 5 Chinese working, and they are the best people from China, that's why my cost is more. I don't want to take any chance. But I want to make a perfect material.

You mentioned, sir, that initial small orders, we've already started -- sample orders you've started supplying. So any ballpark number you can guide in terms of how do you see FY '21 for PU in terms of either volumes or revenue, or utilization will also help?

You see this is very difficult to predict, but I can tell you for sure that within 1.5-year time, I will try my best to -- within 2 years' time, I will try my best to use all the 3 shifts of first machine. And if the things move, and I'm sure it will move, you may order next line within a year's time. And in fact, we are working hard to introduce in automotive industry also, the PU material. And if that happens, the price is unimaginable.

The next question is from the line of Raj Desai from Prospero Tree. Mr. Raj, your line in talk mode, please go ahead.

Hello?

Mr. Raj, we are not able to hear you.

Hello? Can you hear me now?

Now, we can hear you.

So, sir, can you tell me what will be the cost per quarter for the new plant?

It is not possible to tell you right now. I don't remember, I have not everything in fingers. Whatever you are asking me, please send me a note. I'll send you by mail. How can I remember that what is the cost of the quarter? Although, but it is much cheaper than Rajasthan. This much I can tell you.

Okay. And sir, the technical staff who were going to come from China to -- for the machine training, so what is the status on that?

That I have already spoken, 4, 5 Chinese are here already from last 2 months, and they will be here for another 2 years to train my people and to understand the technology, to understand the recipes, all those.

Okay. And any particular impact that we will be getting on this coronavirus. Any good impact? Anything which we can take an opportunity in this?

No. How will it be opportunity? This coronavirus, I think, even Mr. Modi or Mr. Trump do not know what is going to happen. It is all guessing and let's pray God that everything happens good because I've heard in TV that they are saying by April, this should go off. So let us hope so. And in the meantime, I have started getting -- ordering my material in west also, so as not to stop my production. I'm taking that extra care.

Okay. And sir, can you please provide me the segmental revenue mix for this current quarter?

Next coming quarter?

[Foreign Language] This current quarter, segmental mix.

This fourth quarter?

Q3.

Which one, please? You want Q3?

Yes, sir, Q3, Q3, Q3.

Yes. Mr. CFO will explain.

Yes. Segment-wise, you want segment-wise, no?

Yes, sir. Segment-wise.

Total, total -- as I already told, due to competition -- concern to competition, we will not discuss the volume data in detail. Only I will tell you the total volume and if anyone wants more details, they can send us a mail, we will reply. Okay?

Okay, sir.

Yes. So total volume is 6,077,000 linear meter. Okay? Out of that, around 73% is domestic and remaining is export.

Okay, sir. And yes, sir, one more thing. Sir, in case of BMW, sir, so any audit status on that?