Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Yes. Congrats on a great set of numbers. My question was in relation to the automotive side. So you already spoke about the kind of increase that you see over the next 3 years. So related to that, what would be automotive as a percentage of your overall top line -- 3 years down the line? And would it be fair to assume that the last portion of that would be from the export OEM side? Secondly, you also spoke about the import substitution opportunity that is coming up as business is moving away from China. So are you already seeing some traction on that side for the Indian OEMs or even from the global OEMs for auto? And lastly, do you have any plans for inorganic acquisitions considering the large cash balance on your books? Those would be my questions.

We see so far, the last point which you have said acquisition. Now in India, there is no use of making any acquisition because the companies are not that standard, which we need. So if you had to change the whole plant, what is the use? When you actually make an acquisition -- or acquisitions, there are 2 things. One is that company is well made. They have good R&D or they have very good business, then only acquisition is good. Now I don't see in India any company, which I will like to acquisition -- at the moment because the kind of product we like to make that -- for that, we need very good machineries. Now today, whatever machineries these guys are using, our machine cost at least 6 to 8x more than that. So that the 6 to 8x, I'm not going to spend just like that, it must be something. There is a productivity, there is a good quality consistency. There are so many things. So at the moment, of course, so many offers come to a company, but I'm not able to satisfy myself to go for that. Because the problem is whoever is exporting $1.50, $1.40, my export start here in Dubai with $3.50. So what do I do with those kind of business? So at the moment, in India, maybe if some offer comes companies from Europe or America, USA, we may think, but not in India at the moment.

The next question is from the line of Ashish Poddar from Anand Rathi Research.

Yes, many congratulations, Poddar, sir, and the team. Sir, my question is that you highlighted that you want to become a #3 player globally. So if you can give some sense about who are the top 3, 4 players currently and what are their capacities today.

I can't tell you the capacity. I can give you the names. CGP, Canadian General Power. [indiscernible] struggling, these 4, 5 companies and then one company in Europe also for the [indiscernible]. Yes. [indiscernible] is also there, but they are not very strong. So far, you can call somebody whose main competitor is [ Teleco ] [indiscernible], who has taken over one more company also. And then there's [ CVT ]. They have a plant in China. They have a plant in USA [indiscernible] have 2 plants in Europe. They have a plant in China. They have a plant in Mexico in America, and America, close to America. So for automotive concerns, these 3 companies are namely. And then one is Vauxhall or something in Europe. They are also supplying to automotive volume. So if you talk -- we can talk about 4, 5 companies. One is also [indiscernible] in America, but that is going down. You can say, practically, these 4 companies are main companies who are giving -- we are giving -- started giving competition to this company. Of course, it takes time. It cannot happen in a day. Gradually, we are moving back. BMW has offered us to -- that if everything goes all right, we can start supplying to China also from India.

Yes, sir, heartening to hear all this. In the PU plant, earlier, I think we were focusing more on the footwear segment, and that was our focus area. Now we are also saying that automotive demand will also come to this -- come for this. So if you can give some sense about the revenue? Currently, it is [ 11 ] -- about INR 10 crores of revenue on an annual basis at the current run rate. But in the next 2, 3 years, do you think that this can be INR 100 crores plus potential from the PU plant?

In the next 2, 3 years, what will be our revenues from the PU plant?

Yes. On PU plant, I told you this last month, we have said 1 crore. I think in the next 2, 3 years, at least -- [Foreign Language] I think, we should able to do at least INR 100 crores, INR 50 crores to INR 100 crores in next 2, 3 years' time. And then you see it is very difficult to say once the footwear business takes place, maybe you have to immediately have a second line, third line, fourth line like this. It all depends. Now the things have started picking up. Now you see the biggest problem in PU in lower product today, you see in India everywhere, 70% market is for lower grade, 20% is medium grade and 10% -- 7% to 8% for high grade. I'm not entering in lower grades because in lower grade, you will make nothing. So I'm concentrating on medium and medium high grade and higher grade. And we are very seriously working on that. And we are getting the result also gradually because we have to fight with China. That's why we have -- first to supply to USA competitive materials, we've started making [indiscernible] knitted fabric. Now we are going for what a fabric is used, mostly uses in the steel material. So we are going to start that plant also in next 1.5 year positively. You see, we have to fight with the raw material with China. So that's what we are doing. Now in one plant, you can easily make 100 crores. So today, we have one line, and we have a capacity to put it up to 4 lines. There are the space we have got. So gradually, we will keep on increasing. And my target is to increase steel material production as much as possible to add good value as it is the items which are produced in PVC and in PU, on possible general items. The value addition is more than 30%, 30%, 35%. If something I'm selling in PVC, say, for INR 100, if I make it in PU, sell it, it not less than INR 130 or INR 140. So value addition is very high in PU even in general items. So there is a good future in PU. That's why I have put up so much money. And first because of COVID, we were delayed by 4 months because we have hired in crew from Taiwan, one of the top most R&D person. We have accounted in, but because of these visa problems and all that, he is not able to come. But the way things are moving, hopefully, by March or April, he should be able to join here. He has big exposure of all of our world for -- especially footwear business. So there is a big scope, I'm not worried. And now gradually the genuine leather is being shifted to artificial leather in PVC and PU because the quality are becoming very close to leather. General people cannot buy it, whether it is PU or PVC or genuine leather. And whatever happened, there is talk about this electric car. When electric car comes, so many people who are making Indian parts will wipe out. But in any car, the seats are required. So our business will not be affected.

The next question is from the line of Ankit Gor from Systematix.

Sir, we talked about setting up a plant in USA. Any nearby idea or any firm decisions from when we can think of it or?

So you see, I have to expand the business first. That's what I'm doing. Today, we are now today, at the moment, we are doing export OEM about 180,000 to 175,000. So I will first bring it to at least 400,000, which we are doing and hopefully will be done. And as soon as I see that okay, this is happening, which will happen, then we will start -- have already started working on seeing the land and sites and all that. We have already started working with USA, government and what kind of a benefit they can give. This all -- preliminary work has started.

Right, sir. And you also mentioned that this once Mercedes supply will start, you'll also supply to USA customer, USA requirement.

No, that first 1 year, we have to satisfy them with our services, with our quality. They have told us that they are interested in buying in USA as well as in China also.

Okay.

Those decision will be taken after 6 or 8 months when our supplies have [ circulated ].

Right. And sir, you mentioned about one of the company -- in one of the company where you will also tie up for a PVC fabric, who is very big in PU. Which was that company name, sir, if you can repeat that company name?

Do you -- you are talking in PU?

[Foreign Language]

[indiscernible] that is in South Korea. [Foreign Language] [ Datsun ] is supplying from Korea to Indian Hyundai company in 2 models, 1 or 2 models, which are expensive material about $18 to $20. We are discussing for that also. PVC they are not manufacturing. But they are hold all over the world of Korean companies. So they are interested in buying PVC from us to supply their different countries of Korean automotive. And they want to start it with India because in India, also, one company, big company in Korea, [indiscernible]. They are supplying high-value items, which they want to start with us.

The next question is from the [ Jadin Gir ] from Alpha Capital.

Congrats for a good set of numbers. Sir, my first question, you talked about a lot of "segment growth" in terms of 75% to 100% next 3 years. Would you like to have any comment on the non-auto growth as in the footwear and aftermarket, what do we expect in those 2 segments over the next 2, 3 years, please?

Automotive, what I have told you is automotive OEM export, automotive domestic OEM and automotive replacement point. There are 3 segments. So I'm talking about growth of improving all 3 -- different segments.

Or no, not [indiscernible]. Sir, basically footwear...

[Foreign Language] There is a very big competition. That's why I've started this to [ deal ] there is no big competition on to you. Of course, there are 2 companies, but they are very limited, and they don't have too much technology. And since, as I told you just now that we have had a Taiwanese R&D person, he will come maybe in March or April. Because of this COVID problem, he couldn't come. So what I'm doing now that the quality product manufacturers of footwear are maximum in PVC today. You can say 95%. So I want to convert them gradually with the PU. So when we really start PU, which we have started and when it starts growing, the footwear segment will [indiscernible]. Because in PVC, everybody is trying to cut corners and go through the -- all the leather [ cloth ] company's balance sheet. You will see the difference, they are nowhere near Mayur. Why? Because they are not investing in quality, and they are just cutting the cost. So that's why I started this to you also, that I want to convert them in PU from PVC further. It is our -- in furnishing, we don't have a very big presence in furnishing. Now I have recently hired a guy, a good guy for marketing in furnishing who's working with D'decor. Now we are working very seriously on establishing good business for furnishing because furnishing is also having a very good market whether we have started getting orders from our PU [indiscernible] people have started buying a little bit. So we have to concentrate on furnishing. We have to concentrate more on leather goods. We have to concentrate on footwear in PU product to increase our volume and increase our sales, right?

Yes, sir. And sir, margin [Foreign Language] any comment -- in this quarter is very, very good compared to our history. So do we expect to maintain it or [Foreign Language] what we can expect the margin trend?

[Foreign Language]

Sure.

[Foreign Language] So I think we'll be able to maintain.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Yes. Sir, just a follow-up on margin, I was asking then. See, this is the best-ever margin even as a percentage or on per meter terms. So anything in the mix that you want to highlight was peculiar for this quarter? And in any case, Volkswagen-type orders were not executed. So I just wanted to understand anything peculiar that you want to highlight and sustainability of this per meter margin? Because in the past, your per meter hasn't gone above, let's say, about INR 40 a meter.

Yes. What are you trying to ask?

Sir, I'm trying to ask is that anything specific about this quarter and the margin per meter or percentage margin being so high and never...

[indiscernible] was so high -- was the reason that here increased the prices in the market and we had old stock also a little bit, also made some difference. And then as I told you that automotive, we haven't got an increment in this quarter [indiscernible] in this quarter. So that will be -- I mean, compensate. So I think it should be closer to this. Maybe [ 1.5% ] less or no.

The next question is from the line of [ Rahul Picha from Multi-Act ].

Sir, congrats on great numbers. Sir, firstly, just to clarify on Volkswagen India. You said we'll be supplying 30,000 to 40,000 meters per month of them by May. So I just wanted to understand, have we already started supplies and it will be ramped up to 30,000, 40,000 by May? Or we are not supplying anything to them right now, and it will start to...

At the moment, we are not supplying anything. There are so many items. We have invested a lot of money in making the embossing roll, perforation machine and their dies. In automotive, I think doesn't start like you go to the market and ask for something, and they have said look this and this, no. They start with a very systematic manner, and it takes time. So the question is that they have already approved our materials. Every time we are making some embossing rolls, we have made more than 4 or 5 embossing rolls invested more than INR 2 crore, that no company will just tell us to do this without any confirmation of orders. The prices have been decided. Everything has been done. This will start from May itself. Now it has not started. Now the only trials are going on. [Foreign Language]. Then they will start. So they are planning to start by second quarter. So naturally, the supplies will start from maybe May or June, maximum. That's what they are predicting according to that I am telling you, as per today's situation. If it is -- goes, 1 month or 2 months here and there, I can't say. But one thing I can say that we are assured of getting business. So they will also not like to make their suppliers invest so much money.

Right. Sir, so broadly, the incremental volume visibility that we have over the next 12 months is roughly 40,000 from Volkswagen India, 40,000 from Mercedes and 15,000 to 20,000 from BMW when that starts. Is that correct? One line...

BMW will start in 2022, not in 2021.

Yes. So over the next 12 to 18 months, this kind of a monthly volume run rate will get added?

Yes.

Okay. And sir, a couple of quarters back, you were also saying that we are trying to onboard Hero as well in 2-wheelers. So where are we on that?

So 2-wheelers. Now Hero we are trying, we are going and sales people are moving. They have very competitive price, very, very competitive price. So we want to go there with the premium products, which they are working on. You see current products, if I want to take, I can take it tomorrow. That's not a big issue. Just reduce INR 1, and they will start buying. But I'm going for a premium product. But we are working seriously. They're -- have given us 2, 3 different samples, which we have given them. They are making the 2-wheeler seats. Hopefully, something should be done in the next 6 months' time, I don't know. But definitely, it will happen. You see automotive industry takes long time. Even to talk to you, it takes a year. For Mercedes my marketing person in Germany who is working for us, it took 2 years, 1.5 years, more than 1.5 years, just to take an appointment that, yes there is a company in India, who is making this leather product. It's not easy. [Foreign Language] It's a very, very difficult.

Next question is from the line of Gaurav Bhandari from Monarch Capital.

Sir, could you please tell us about your plans to professionalize the company? Sir, we have been seeing that you are hiring more senior people. So if you can talk about that?

Yes. You see, we have hired CFO, he knows, we have hired HR heads, and now we are hiring for automotive industry a very strong person. We are working on, we have already taken an interview. We are working very seriously, already started taking the bio datas India and abroad to hire one COO or managing all this. Already, we have got 3 units, then maybe we are working very seriously one unit in south, but we are working across [indiscernible]. And one thing I can tell you the way I'm thinking, the way on the direction which we are working, I'm going to have [Foreign Language] -- we are going to have a fully professional companies because the business is increasing. When the business are increasing, we alone cannot handle everything. There has to be a system, there has to be forward-thinking maybe for the next 5 years, and we should have good people like how we got BMW and Mercedes because we hired a smart person from Europe for R&D. Like that, we are working very seriously but first, I'm going to hire [CEO]. Then maybe in the next 2, 3 years, I may have COO also because individual cannot run the company. You have to have professionals. And when you have a professional, they have the ideas from every part of the world. They know how things moves. Individual owner has got a passion. And with his passion, he works hard and get to a particular position. But after that, professionals are required, on which I'm working very seriously. My main job today is to hire a professional and handover the things. I cannot involve on day-to-day business. My job is to add a value addition, have new products, go for backward integration, go for forward integration to reduce the cost and add the value to the product. So definitely in the next 1.5- to 2-year time, I'm going to completely turn it around as a professional company.

The next question is from the line of Jignesh Kamani from GMO.

Just a follow-up on the margin. If you think about crude prices has gone up a lot in last 2, 3 months and all the input cost has gone up, so despite that, do you think 25% to 27% kind of margin is possible because the product mix? Or you think the margin may be under pressure because of the rising crude price?

You see, it is all mix, margin as well as we got an increment from the market. And the market, how you gotten increments? When the market is moving fast, you get incrementals also. If the market is [indiscernible], we don't get an increment. And for that, we have good relation with the raw material suppliers. So we got that benefit also. And now maybe that benefit may be little less. But as I told you, automotive has not given us increment last quarter and this quarter. So that will also add in the margin.

Sure. Second thing on the PU. Any plan for the backward integration on the PU fabric in the chemicals once you scale up this year?

Backward integration.

Yes. In backward integration, I told you that I'm going for [indiscernible]. And then gradually, I'm going to make a large consumption quantity offer PV chemical also. That is in second stage. And I have a plan to make nonwoven fabric also. That is the backward integration back in cloth in PU, mainly [indiscernible] and nonwoven fabric is used. So [indiscernible], definitely we are going to start in next 1.5 years. And then is the [indiscernible] and then is the PU chemical because we have to fight with China. How our country will fight with China. [Foreign Language]. That's what I'm doing.

Understood. And last question, many other, you can say, competitors and many other company are complaining about, you can say, unavailability of containers for the export and import and hence, some of the consignment has been delay or deferred. Are you also facing any issue on the container unavailability and any issue on the export on account of that?

No, no. I don't think so. We are not facing those kind of problems.

Last question, this is last question.

Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Advance thanks all of you who joined this conference call. And I, as Chairman of company, assure you that the company will do their best to improve the productivity, to improve the margin and give a good return to my shareholders. That's what I can say. And we are going to make professional company 100% in the next years time. Thank you.

Thank you. On behalf of Mayur Uniquoters [indiscernible].