Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 and FY '23 Earnings Conference Call of Mayur Uniquoters Limited hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you.

Yes, thank you, Sherri. Hi. Good afternoon, everyone. On behalf of Monarch Networth Capital, it's our pleasure to host the senior management of Mayur Uniquoters. We have with us Mr. Suresh Kumar Poddar, Chairman and Managing Director of the company; and Mr. Vinod Sharma, the CFO of the company. I would now request the CFO sir to start with the opening remarks and then we'll move to Q&A. Thank you, and over to you, sir.

Thank you, Rahul. Good afternoon 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 for FY '23 conference call. Mayur Uniquoters Limited being a market leader in the synthetic leather industry and an organized player has been able to leverage the emerging opportunities and delivered exemplary performance in past years, both in national and international business markets. Now, I would like to start with the financial highlights for Q4 FY '23 under review and we will also reply your queries after our review on financial results for the quarter. The company has achieved revenue from operations on a stand-alone basis, amounting to INR 199 crores, PBT INR 34.22 crores and PAT INR 27.38 crores during the quarter. The revenue from operation has increased by 17% and PBT and PAT both have increased 5% over the last quarter. The revenue from operations on consolidated basis is INR 193.24 crores, PBT INR 29.3 crores and PAT INR 23.38 crores and the revenue has increased by 9%, however, the PBT and PAT both have decreased 12% during the quarter. Our endeavor is to make the company a preferred supplier for the leading OEM, especially in U.S. and European regions. In OEM sector, our export is going to be increased in current and next financial year. As we have been selected and also received a good and confirmed orders for some upcoming new models in export and domestic markets. For which supply for some of the new models have already started and some models is expected to start from second quarter of current financial year. So we are hoping a very good performance, especially in these 2 years in exports market. While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities to our society. Under the Corporate Social Responsibility program, contribution towards regular plantations and plan to do at large-scale in coming years. The company has also adopted many happy schools for educations of children, and the company has worked on education for all and underprivileged children, various health care initiatives, especially child skill development, water for all, sanitation at school area, distribution of books, bags, cloths, and most importantly, family planning and family welfare schemes in the villages. The state government has recognized these initiatives taken by Mayur on various platform. I'm thankful to all the investors for their valuable time to those who became the part of this earning call. With this positive note, I would like to conclude the requests -- and request you all to open the forum for questions. But we also request that, due to time constraint, duration of this call will be around 55 minutes. We, therefore, request to kindly avoid repeat questions and we will not discuss volume data. So please avoid volume-related queries. Over to you, Rahul.

[Operator Instructions] We have a first question from the line of Dhiral Shah from PhillipCapital.

So what kind of volume growth we have seen in Q4 and for the full-year FY '23? Hello? Am I audible?

Yes, sir.

What kind of volume growth we have seen in Q4 and for the full-year FY '23? And also, particularly for the export OEM side, what was the growth, sir, in FY '23?

The volume growth in Q4 is around 17% and the full-year is 14.36%.

And sir, what was the growth in the export OEM side in FY '23, sir?

In the year, export side is 18.38%.

Sir, this is for the Q4 or FY '23?

It is FY '23 is 18.38%. Okay? And Q4 is 45%.

Sir, 85%?

45% in Q4.

Okay, okay. And, sir, for the full-year, what was the contribution of PUs?

It was around -- for the full-year?

Yes, sir. For the full-year and even for the Q4.

Full-year, PU division contributed around 8 lakh meters. Okay? And during the quarter, it is around 2 lakh meters.

We have our next question from the line of Nirali Gopani from Unique PMS.

Sir, if you can just talk about the demand scenario, like overall what your are seeing in footwear domestic and exports?

Demand scenario in the current year, we are expecting around 5% [ put here ] nearly. And export around 45%. Hello?

Okay. Yes. I can hear you, sir. And domestic?

Domestic, overall, we are expecting around 6% to 8%. And overall, we are expecting around the 17%, 18% growth in this year.

In the revenue terms you are talking about, right?

Yes.

But if I'm not wrong in the last call in the -- Suresh sir had mentioned that he is looking at a revenue of about INR 1,000 crores for FY '24. That comes to a growth of about 30% in revenue.

30% in revenue?

Yes, he said INR 1,000 crores in FY '24, and INR 1,200 crores in FY '25.

We have revisited the -- our projections and fine-tuned as per the data given to you. So you can revise the data.

You see, these all expectations were given on the basis of expectation given to us by auto OEM. But auto OEM change quarterly. I mean, suppose they have given us the order for a particular model and that model was supposed to start in a particular month. But it has delayed for 3 months or 6 months. If something like that happened, so we gave you the overall projection according to the projection of automotive industry. Whatever [ less find ] that will increase in this year, '23-'24.

Because I thought that you had [Technical Difficulty] orders for FY '24 and [Technical Difficulty]

I'm sorry, you're sound muffled, Nirali.

Your voice is not clear. I think sound is muffling.

Is it better now?

No, it is still muffled.

Can you hear me now?

Yes.

Yes. Now it's clear.

Okay. So then, sir, what you're trying to say is that, whatever orders are delays will go to FY '25?

FY '25 we are expecting another 25% to 30%. 25% nearly and very good -- actually, we -- as I have already told you that we are expecting very good sales performance in export, especially in OEM. And in next 2 years, we are expecting around 60% and 70%. This year, we are expecting 60%, next year 70% sales growth in export OEM.

So this correction, which we have done in the [indiscernible] that is basically on the domestic side or that is also on the export side only? And after the correction you are seeing this kind of growth?

Based on the numbers or the requirement, given by the OEM customers. So we have -- we will still inform you revised -- the actual expectations, which are going to be -- happen.

No, I understand that. What I was trying to understand is that the order which has been delayed, that is also on the export side only, right?

Yes.

Okay, okay. And what kind of margin do you see sustainable?

The margin, which we are currently. I mean, it's not be lesser than that. So it's not be lesser than that.

So either this margin or better than that, that is what you're trying to say?

Yes.

Okay. And this other expense has grown substantially. So earlier that the reason was because of the transportation cost. But still it's a significant growth. So can you just elaborate like what are the reasons for the certain increase in other expense?

As you know, in last 2, 3 years because of COVID, tour programs by the marketing department were not happened. But in last year we allowed them to go outside even in India as well as outside India. So, traveling expenses increased, and some CSR expenses, we have increased and other consultants and we have -- because in last -- when -- after GST implementation, we got some GST audits and consultants service and all. So, all these type of services have increased and capacity utilization also increased because of supply requirement to exports. So consumables, et cetera., repair and maintenance requirement also increased, because of that this other expenses have increased this year.

Okay. And what kind of outlook do we have for the PU for this year? Is it demand picking up? Is the pricing difference with the Chinese import, is it narrowing down? If you can throw some light there also?

You see, we are fighting with the Government of India. And there is lot of manipulation going on as we have discussed previously also. And I'm fed up. And we have met the government Commerce Department. Well, again, we have persuaded them to put up anti-dumping duty. Anti-dumping duty the benefit is that, you cannot manipulate any invoices. That is certain duty. But given in that these guys have started manipulating by showing half the quantity. So this is going on like hell. So I met just 1 week back to the Commerce Department and we said that this is happening and you people are not supporting. We are 4 PU manufacturer and we are in a very bad shape. And further thing that, even in China, whatever export is done in footwear to other countries, that is 80% is made out of PU leather. In India, we are not making PU leather sufficient quantity. We are making only PVC and those who wants to improve that Indian footwear industry should use PU, but because of these things, we are not able. So finally, government is using the big export business. So they wanted us to give a letter, we have given a letter, we say that we are going to discuss in maybe next 10, 15 days again, we will go there and talk to them. In the meantime, what we have seen that these kind of things very difficult to get it over. I don't know what kind of action government is going to take. But now, we have find out one solution that all the big brands, like in automotive, so the big International brands, they are buying footwear from outside and putting up their brand and selling a good quantity, but their quality control is very high. And they informed their suppliers to use particular kind of raw material from particular supplier. So we have been in touch with 2, 3 big brands. They have visited our factory also. But this is also little time taking like automotive industry. First year to show them the factory, tell them about you and then they will consider. It is like that. So we have already started consulting with these guys. And they are very happy. And one good thing what we feel at the moment that they are fed up China and they want to ship to India. So they are taking good interest. If that thing happens, it will take a little time. And then we'll get the margin also and the business also, because they need is specific quality, which you don't get with the Chinese suppliers. Or those who are importing, they are giving that quality, giving in cheaper prices. So that is the one we are working very seriously on it. Then, we are working very strongly on sports shoes. Sports shoes are expensive. I'm talking this for sports shoes also the quality export shoe, the branded export shoes. In that they need a good material and they pay a good price also, but again that's the same thing that we have started discussing. We have started submitting samples and they are working on it. I think in the third or fourth quarter of this year, we should get some results. And this is like this, if 1 or 2 big brands starts making, buying the material then others will follow. And other thing, the leather goods, all these big brands it will go to the showrooms. You will find gents, ladies purses, belts, bags, all those things. So there also they buy PU material. So once these big brands are approved, then there is the big scope in leather goods, where we are not selling almost like nothing. So that area can also be opened. So I'm very hopeful, of course, it will take some time, but it will happen.

We'll take our next question from the line of Deepak Lalwani from Unifi Capital.

So out of the consolidated revenues what will be the share of our OEM exports in the business?

OEM exports business is around -- do you want to know the export side in consolidation or the export we have done from India?

Yes. So, on the consolidation side, yes, the OEM exports in total.

We can give you right now the export side's value is around INR 142.30 crores. This is the export OEM and you can take the subsidiary wise consolidated exports -- this is the export, but you want export consolidated exports. We can give you separately, you can send me the mail. I'll check and give you the detail.

Sure. Sir, so you mentioned in your earlier comment that this INR 140 crores, INR 150 crores, these will grow at a higher rate of 60%, 70%. So if you can explain -- probably elaborate on what are the drivers that will take this number -- the growth number to 60%, 70%. If you can tell us what the ramp-up of the Mercedes order will be for '24-'25? And also...

Mr. Lalwani, your voice is very low.

Okay. I understood your question. Listen, as I told time-to-time that automotive industry takes time. Suppose today they approve a particular model. And that model is supposed to start maybe after 6 months or 9 months. But they give the approval at least 1 to 1.5 year in advance to the suppliers that okay for this model, we will supply this material and we will be giving -- we will start making this model from so and so date. So accordingly we calculate that when the supply will start. So many times it happens that it get delayed. It never cancel. What we are saying you today that this will be export on the basis of the order already we have got. And then they have already selected us for particular models, which according to them are going to start in particular quarters. Accordingly, we are telling you. So whatever we are telling you right now, since, you can say indirectly the order is in our hand. It can be delayed. I don't know, maybe 3 months delayed or 6 months delayed, some quantity. It cannot be -- that suppose if I have got approval of 4 different items and all will be delayed. Maybe 1 item, may be delayed like that only.

Sir, so is it fair to assume that it's largely the Mercedes order which will ramp-up and also the BMW, which should start and...

No. But BMW it will start by the end of '24, not now. We have started with Thailand little bit quantity, that is hardly 2,000, 3,000 meters per month. And another model which we got approval, that will start by the end of '24 or the beginning of '25. That also requirement is about 30,000 to 35,000 meters per month.

Okay. And what will be the value of the Mercedes order for '24-'25?

This year, we have done about INR 40 crores to INR 45 crores. INR 5,344 crores, this year, '22-'23. And it will be same next year also. I mean, this year also.

Sir, are there any other OEMs, which we have added which gives you the confidence of this 60% sort of growth? I just wanted more clarity on that.

See, we have added in USA, the Ford Motor, we have added. Ford Motor, we have added. And with Stellantis more and more models we have been introduced. And then we've got a business from our competitors.

Understood. All right, sir. And on the domestic side, if you can give some -- your comments on the footwear segment, how the recovery is shaping up? And also the furnishing side, any progress you have made on that segment?

See, so far, as footwear is concerned, it was down in April also, and it was down in March. March, April, May was down. Whereas it is a very strong period, but unfortunately, this year, we don't know what happened, the market is not that strong. People say from June it should improve. And little bit improvement we have seen in last 7 days. And I think it should improve, but it is very difficult to say, you don't like -- I'm talking about automotive. I can't tell you about footwear. Footwear only when I get this sports shoe business, then I can say that business will increase. And here also should increase because from last year, this year business is less in total footwear industry. And further, because we are supplying high price material, so that is more of [indiscernible]. But even though we have done, how much increase we have done in footwear?

Last year?

This in '23 -- '22-'23.

We have done around 10%.

Even in spite of this, we have increased our sales to 10% in '22-'23. And '23-'24, we expect this almost same, 6%, 7%. According to today's condition, if the things improve, which may increase. And it will increase.

Okay.

You see, the market is very difficult to say nowadays what happen suddenly we never thought that footwear markets will go down so much. But it has gone down. So that...

And on the furnishing side, sir, what are...

We already appointed 350 dealers. And we have program in this year to add another 300 minimum. And sales is increasing, but this is [indiscernible]. And you know in retail, we are supplying to a particular -- those shops who are keeping different types of furnishing material. Now, they keep our...

Ladies and gentlemen, we have lost the connection of the management line. Please stay connected while we reconnect them. We have the management line back on the call. Please go ahead, sir.

Yes. We were talking about furnishing side. Is it -- ladies and gentlemen, now we're talking.

Yes, sir. I am listening here.

Yes, yes. So you were talking about furnishing sales. So this year we have increased 60% sales. Although sales is not very big, but compared to last year, it has increased 60% and next year, '23-'24, about [Foreign Language] 30%. Next 2 years you can say 30% and 40%. You see, this retail business takes time. But the margin is good there. But I think it will take at least 2 years minimum to establish the name and all that. Because, first of all, we have to distribute and meet the dealers all over India. Now, we have appointed 4 salesmen for North, South, East, West. And then we are appointing distributors also. We have increased from 2 distributors to 3 distributors. So it will take time, but we are getting good response. Every month the retail sale is increasing. Nowadays, we are moving to this cinema halls, PVR and all that, because they have good quality. So that kind of a business also a little bit we have started getting. Now, we are approaching to the furniture manufacture also. And they are also giving us good response. So all these things takes time, but we are confident that it will keep on increasing. And in furnishing, 30%, 40% improvement will be there. These I'm talking minimum every year, because the quantum is less.

Mr. Lalwani, I request you to come back in the queue for follow-up questions. [Operator Instructions] We have our next question from the line of Awanish Chandra from SMIFS.

Congratulations for that Sharma, sir, on a -- this good set of number. Sir, you have highlighted very good growth for next 2 years 17%, 18% and then 25%, 30%. So what would be the corresponding CapEx plan for next 2 years in FY '24 and '25?

Next 2 years, you see, at the current position, we don't need, but we are thinking very seriously to start the plant in Mexico. So if that happens, then there will be a CapEx. But we are not sure, until unless this -- what they are saying for the next 2 years, we will increase this business. If we see really it is happening, then, of course, we will go for it.

Okay. So to reach INR 1,100 crores, INR 1,200 crores, we don't require any CapEx.

No, no.

Yes, yes. We don't require.

Okay. So as such there is no CapEx plan as of today?

Major capital plan is not here, but small CapEx plan is continued -- will continued.

So INR 5 crores, INR 10 crores of maintenance CapEx sort of thing.

Actually, we have sufficient capacity right now and up to '25 we don't need any further major CapEx.

Okay, sir. And sir, second question on the PU side, you have already highlighted all the issue, and you have done 8 lakh meters in FY '23. So any guidance on PU side, what can we achieve in FY '24 and FY '25?

You may catch over the next 2 years.

I've explained just now that we are working with all the big brands for PU. I've just explained.

Any number, sir, like 8 lakh meters we have done, can we do like 10?

This year we have done 8 lakhs meter.

So this year how much we have done?

8 lakhs meter.

8 lakhs meter. This year, minimum 25% increase in production.

We have our next question from the line of Viraj Kacharia from SiMPL. Mr. Viraj Kacharia, please go ahead with your question. Since there is no response. We move to the next question from the line of Devansh Nigotia from SiMPL.

Sir, if we look at our consol minus stand-alone, in overseas business there is negative sales of INR 6 crores and EBITDA loss of INR 5 crores. So usually what we see is that, Q1 has some losses at overseas -- in overseas operation and then in subsequent quarters, it gets reversed. So this time, how is it different? I mean, can you help us...

Kacharia, your voice is not coming clear.

Is it better?

You speak slow so that we can get a clear voice.

Okay. So in overseas operations, if I look at consol minus stand-alone, there is negative sales of INR 6 crores, and there is EBITDA loss of INR 5 crores. And historically, what we see is that, whenever there is some difference between consol and stand-alone, it will gets reversed in subsequent quarters through sales in [ yard rate ] -- by sales in our export subsidiary. So this time, how is it different? Are there any write-off of inventory or receivables?

I'll tell you. This will happen in this quarter. Actually, in March quarter, our inventory has increased to the double. That's why the [ profit utilization ] in stand-alone is reflecting, but not in consol. But in this quarter, this will be reflected.

So basically, there will be some step up in sales in Q1 because there is some inventories that are holding in our subsidiary?

Yes, we are trying to reduce their inventory. And as far as the reduction in inventory will take place, it will be reflected in the consolidated results also.

Sir, in our export, we mentioned that Mercedes, we are guiding for, I think, flatter sales. For Ford old is also there and furnishing is the third part where growth is dry. So if you look at -- if you can break up this 30%, 40% guidance that we are giving in terms of which are the key segments? And if you can break up that growth in different segments over the next 1, 2 years? How do we see this business growing in different export segment?

And we have only 2 segments in exports, export OEM and export general.

Export general, all over the world, we are total different kind of products. Maybe automotive, maybe footwear...

It may be furnishing.

This all included.

So it is mixed actually in general. And OEM mix, we have contact with OEM -- automotive as well, customers.

And how export OEM is distributed in terms of number of models, number of customers? And what is the mix indicatively in terms of life cycle of the bulk of the portfolio?

See, generally, life cycle of a particular model is 7 to 8 years. It depends if it is good, it may be more, if it is not selling then it will close in between. But generally 6, 7 years, 6, 7 years.

Okay. And in terms of number of models?