Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mayur Uniquoters Limited Q3 FY '24 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. Rahul Dani from Monarch Networth Capital. Thank you. And over to you, Mr. Dani.

Thank you, Nirav. Good afternoon, everyone. On behalf of Monarch Networth Capital, it's my 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, CFO of the company. I would now request Mr. Vinod Sharma to start the call with his opening remarks, 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 is 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 '24 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 the past year both in national and international business markets. Now I would like to start with financial highlights for Q3 FY '24 under review, and we will also give replies to your queries after our review on the financial results for the quarter. The company has achieved the revenue from operations on a stand-alone basis is INR 175 crores, PBT is INR 39 crores and PAT INR 29 crores. In the quarter, the revenue is decreased by 4%, but the PBT and PAT have increased very good by 3%. The revenue from operations on consolidated basis is INR 178 crores. PBT is INR 36.45 crores, and PAT INR 27.30 crores. Our endeavor is to make the company a preferred supplier for the leading OEMs, especially in U.S. and European markets. As earlier informed, we have been selected and received good orders from -- for OEM supplies to some new models in export and domestic markets. And based on that, our OEM exports sales is expected to increase in coming quarters of next 2 years. The supply to some new models has already started and some new models is expected to start in coming quarters. So we are having good sales performance in next 2 years and coming quarters. While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities towards the society. And then the corporate social responsibilities program, we contributed towards Har Ghar Tiranga, regular plantation plans to do a large-scale income in this year and coming years. The company has also adopted many happy schools for education for children and the company has worked on education for all and under privileged children, various health care initiatives, especially child care development and water for all, sanitation in school area, distribution of books, bags, clothes, et cetera, and most importantly, family planning and family welfare schemes in the villages. The state government has also recognized these initiatives taken by companies on various platforms. I'm very much 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 and request you all to open the call for questions.

[Operator Instructions] The first question is from the line of Priyank Chheda from Vallum Capital.

Sir, if you can share the PVC volumes and PU volumes for the quarter as well as the segment chains' breakup, it would be great. It's a request that these data points if are shared on the press release or in the opening remarks, it saves a lot of time.

We will tell you the total volume of PVC and PU in the quarter. Total volume we sold is 70,55,000 meters. And out of that, the PU was 2,07,000 meters.

Okay. And the sales breakup within the segments or domestic OEM?

You can note down. Export general INR 17.7 crores.

You are telling for the YTD?

See, I'm telling you quarterly, okay? The export general is INR 17.66 crores. Export OEM, INR 35.42 crores. Total export is INR 53.09 crores. Also, OEM INR 41.60 crores. Auto replacement INR 37.80 crores, footwear INR 33.60 crores, furnishing INR 5.60 crores and remaining is you can club in others.

Sir, where are you on the export volumes that we were supposed to scale up on the various OEM platforms? If you can help me, the incremental orders that would come from, say, the BMW, which you we were planning to scale up from 4,000 to 40,000. And for the Ford Motors, the new supplies are supposed to start as well as Mercedes volumes pick up. So if you can help me on the total volumes of exports as well as OEM-wise, where are we scaling up.

BMW is still 4,000. This 40,000 is new models, we are talking that will be from April 2024. BMW volume because this is -- whenever they start a new model, it's always 6 months here and there. Sometimes they say they will start at this time and suddenly they come up and say another 2 months. And now it's I think for sure from April it should start BMW.

Priyank, I'll request you to come back for a follow-up question. The next question is from the line of Ritika Naik, an individual investor.

Could you give us an idea of how were the realizations this quarter? Were they slightly lower because the revenue Q-o-Q if you see was lower, but the volumes were flattish?

You want to know the regions of revenue lower in this quarter as against the previous quarter, right?

Yes. Yes.

So basically, it is the -- because of footwear because we have down sell in footwear and some quantity, we've seen downwards in replacement. Otherwise, in overall, our revenue is 3%, but profit is up by 9%.

Okay. And was there any impact of freight in this quarter for our exports? And do we see any impact in the ensuing quarters? Also what is our outlook for FY '25?

Overall, increase in exports is 27% and in which OEM has increased 42% in last 9 months of this year and because of this increase in exports, our overall increase in exports is itself 27%. And in coming quarters, it will be increasing gradually.

No. See, if you look at exports overall from Q1 to Q3, there has been a decline from INR 66 crores to INR 53 crores.

Yes. Because in 2 months, OEM exports in the U.S., there were some strikes in the Ford plants. So that's what the reason of decline in exports.

So how do we see that playing out in Q4 and Q1 of next year?

Yes, it will be going to increase.

So is that issue at the Ford plant sorted?

Yes.

Okay. And also, we saw a decline in auto replacement domestic.

Yes, yes, yes. Because of that requirement put by the government that the backward seats will also be having safety bags concept. That's why this requirement, the automotive companies and the customers were working on that to implement that safety bags in backward seats.

So how do we see it playing out in Q4 and Q1?

Sorry?

So how do we see this auto replacement segment playing out in Q4 and Q1? Do we still see the demand being low?

See, regarding replacement market, in every car in the front seat, there is what we call that [Foreign Language]. In front seat when there is an accident, this balloon comes out for the safety. But in the back seat, it is not there. Now they have made compulsory in the back seat also. So whatever in replacement market going on, on the back seat that they have to change the design or all these things, so that's why it is taking a little time. But it will happen. I think maybe -- I think so, I can't assure you, but in the next 3 months, it should happen.

So we don't see Q4 being on the same lines as Q3 when it comes to auto replacement?

[Foreign Language] Because this is a technical matter. So this has to be solved. Government is after that, and they are also requesting government that please increase the time and they are working at the same time to produce the seat covers, which can expand. So I think, if you ask me, frankly, it will happen in the second quarter. Sorry, maybe first quarter or maybe May or June, something like that, end of the first quarter.

Okay. And we have some fixed price contracts also, right, for exports. So are we impacted because of increase in freight cost?

Fixed contract?

Fixed price contracts we have, right, for exports?

Yes. It is a temporary impact on sea freight. And after March, this issue is going to be vanished.

No. I think that should be -- we cannot predict that. This has happened because of this war because the Suez canal was closed. That's why it is there. Now let's see when it will be. Everybody is saying just wait and see. I can't say that when that will...

No, but what impact do we see on the margins because of that?

Of course about, you can say, INR 7, INR 8 down. It's costing us about INR 7 to INR 8 more per meter.

Okay. And what kind of outlook do we see for FY '25?

For what?

For the company as a whole.

I mean '25, '26, you are talking. It should be better, definitely. But real results you will see in '25, '26 because as I told you previously also, the new models order we have been given, but they have not started in full swing right now. So gradually, they are increasing there. [Foreign Language].

Ritika, I'll request to come back for question. Next question is from the line of [ Rachna Kukreja from SiMPL ].

Sir, can you please share if there has been any improvement in terms of realization on a sequential and year-on-year basis?

Like on FY basis in overall totality?

On quarter-on-quarter basis and year-on-year basis, realization.

No, no, sale price has not increased.

Okay. So it's the same over the quarter?

But still we are managing with our management and changing the formulation to reduce the prices so that bottom line is not hurt. But the prices has not increased. Top line prices per meter is not increased.

Okay. Sir, why the prices have not increased and in which segment if you can specify?

You see in all the segments. Now the market is very tight. And other thing, we are surviving because we are dealing with top auto OEM companies, whether it is local or whether it is export or our general export. There, we are getting good volume and good profits also, comparatively. But in local markets like footwear we talk, I would like to tell that because they have introduced some BIS certification, so they have some deadline. Now the problem is for the manufacturer. They have to make the material, supply it to the wholesaler, then wholesaler supply to retailers, then retailers supply to the end customer. Now this is a big circle of 6 months. So therefore, people are scared to keep more stock because on a particular date from particular date, they will not be allowed to sell any material without BIS. So they are fighting with the government that please allow the small industries or I mean up to a certain level industries for this. But the government is not agreeing. And they are fighting, I think. Ultimately, they have to accept. So it's a question of time. Now the big very, very big companies, they have started introducing. But this -- because the footwear business is 80% is for the lower segment. Maybe 15% for the medium segment and 5% for the top segment. So these big companies, those who are manufacturing for big segment, they are able to do it.

Okay. Okay. Got it, sir. Sir, as you said, the realization has remained same. So what was the reason and if we see what was the reason for the call -- what was the reason? The reason for the realization not improving?

Realization not improving. What do you want to ask, ma'am?

I said the realization was same, right?

The realization, you mean to say, per meter cost or you are asking for total top line?

Per meter cost, sir. The fall was due to what?

If the prices are going down, how the prices will increase?

Okay.

Everybody is fighting in this market. See, government may say that we are doing this, this, this. But in general products, the prices are not increasing, not at all.

Rachna, sorry to interrupt you. I'll request to come back for a follow-up question. The next question is from the line of Abhilasha Satale from Quantum Asset Managers.

Basically, I just want to know that in our previous calls, we have indicated that we have around INR 550 crores, INR 600 crores of export order book on like -- for OEMs. So how do we see the execution in terms, like what is your current visibility because you have been saying that the execution has been slow from the OEM front. So you were expecting these orders to get executed by FY '26. So based on current assessment, how much do you see execution in FY '25 and '26?

As I told the previous [ analyst ma'am ] that from '25, '26, you will see the real increment. '24, '25 will also increase, but not on a very big scale. But the profitability will definitely increase.

Abhilasha ma'am, have you got our reply?

[Foreign Language].

[Foreign Language] So you will see the very handsome and good increase in the top line in FY '25, '26.

Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.

Yes. As we told you, our real sell will -- you will see in '25, '26 and it will be highest. And it will be -- and increase will -- you will see in '24, '25 also.

[Foreign Language] margin front, how much lever is there once we start executing these orders full-fledged?

Definitely better than today.

Any indication like 100 basis points, 200 basis points?

That we can't give you right now. But definitely -- we assure you that it will be better.

Next question is from the line of Shashank Kanodia from ICICI Securities.

Sir, in the last con call, you mentioned that second half will be better than the first half and still we reported flat numbers. So sir, going forward, how do we see closing for this fiscal year and next year? So do we expect this year to close at some growth? Or is it going to be largely flattish in nature?

This year, hopefully, it will be flat. But definitely, it will be going to increase in next year. And then again FY '25, '26.

No. But the bottom line will increase for this year also.

And if you see, the bottom line has already increased.

Sureshji and team sir, point is we have been promising good stuff, but my numbers [Foreign Language] time and again. So should investors largely lose hope [Foreign Language], how do we look at it? [Foreign Language] we still landed at less than INR 800-odd crores at this run rate. Next year, we're guiding for decent growth and the actual growth will happen in FY '26. So sir, time and again, there has been over-promising and under-delivered from the management side. So how do we look at things, sir?

It is one thing be assured, number one, for any company, it is very important, in my opinion, to see the bottom line. Now today, I can increase top line like anything. Every year, I can increase 25%, 35%. But if my bottom line is going down, there is no meaning of increasing the top line. So my always aim is that my bottom line should be maintained. So for that, you have to go all over the world. Now recently, we have introduced marine product. We were not making any marine product, but now we have started getting order. So everything in business is not just like that, you can do something. You have to do. It will take time. Now this marine, we are working from last 3 years. Now from this year, we have started getting the orders. Within 1-year time, in marine, we will have good export orders. So main thing is market is already -- who knows that this BIS will happen. And suddenly, the market is 50%, 60% down, what do you do? You can't help it. But what I'm trying to do that to maintain my bottom line, to increase my bottom line, I go to different parts of the world and to see which type of customer I can catch with my profitability increasing. Now with this marine product, it is just like automotive. And we are getting very good response. I mean but one thing you must understand, suppose, I came to you today, you are buying X materials. Okay, my prices is good, everything is good. But you -- I have just approached you and you are buying from somebody from last 10 years, 15 years, 5 years, 20 years. You will not give me the business just like that. It depends on circumstances also. Suppose the supplier from which he is buying, if he is not able to supply in time, then your sale increases suddenly. So everything takes time. And now you see about footwear. Now what is happening in footwear? This BIS [Foreign Language] and all those things. Further, every day new factories are coming. And what they are doing, they are just reducing the price. So what you will do? I can't reduce the price. If once you reduce the price, you can never increase in your lifetime. So now what we have decided, like automotive industry, we are approaching all the worlds big brands. Those who are selling in their brands this footwear products and leather good products. Now like Zara, they had four visits to our Gwalior factory. And now we are sure in next 3, 4 months' time, we'll get the order. Now when we catch hold of this kind of a customer, then we can sell their materials all over the world. They will allow us to sell any part of the world from wherever they're buying those products. But these things, if I want to register to somebody for the whole world, it's not that they will just see in one or two visits, this will happen. Now Zara, we are working from last 3 years. It took us 1.5 years to just to allow them to talk to us that what we are, what we are not. So I have to work according to the future. I cannot go on the product there as to fight every day for the prices because I'm never going to adjust myself with the quality. I cannot play with the quality even 1%. What people are doing, reducing the prices and decreasing the quality. And their sale is increasing. But see the bottom line. How many companies, manufacturing companies had a bottom line like this? Because I am after it. I can increase sale tomorrow. Every year, I can say increase the sale 30%, 40%. There is no problem. But what is the use? You tell me. You have more credit, you have to take more loan. So what is the use? Now today you see in our company, there is 0 loan. We are surplus. That's why we are able to work. So frankly speaking, we are trying our best. Whatever I'm telling you in any -- this quarterly result, that is what I see in the market. That market is not in my control. But I can assure you that we are doing our best. And the customer -- any customer who has come to Mayur, they are never going back. Now if the customer has -- because we are B2B, we are not B2C. So all -- my all predictions are according to my supply. Whatever they say, we tell you. And always it happens. Now so many companies are, now automotive companies, you must have seen Tata's, Mahindra's, they're coming up with new models with so many new models. But what happens? Now suppose they've come out with 5 new models and they have estimated X quantity of the sales. But until and unless that model goes in the market, they don't know actually what is going to be sales. So even after putting up the model, you know what is happening after 3, 4 months. So whatever predictions we are giving you, we are giving according to our customers. Now who knows that this BIS will happen? And you will not believe, these last 3, 4 months, they used to be the best period for footwear industry, which has gone down. During these last 4, 5 months, the business increases more than 30%, 40% now. And instead of that, it has gone down. So what I'm trying to say that we are telling you whatever we get further from our supplier, buyer, and accordingly, we are talking to you. [Foreign Language] 18% footwear was down. It's not a matter of joke. Whereas our footwear was highest. But what you do? Even we are trying our best to meet other areas. Why we have opened so many fronts? Now like we have started retailing this furnishing business, it is going good. Last month, we have sold in retail 20,000 meters, which is not a matter of joke. Now gradually, that will start. We have more than 500 dealers we have Made in India. Our plan is in next 6 months to make another 500. [Foreign Language] different areas. So what I'm trying to say we have a good future plan, but all these plans take time. And now you see why have we started this furnishing business. The main reason is that we know the real price. You are coming directly with the consumer. So your margin is also good. The day it will start having 2, 3 lakh meters, you see the bottom line, this bottom line will go like hell. So everything takes time. Whatever we say, believe me, we say according to our customer what they say. [Foreign Language] These kind of things happens in the business. But we have to see whether we are able to manage our bottom line.

[Operator Instructions] The next question is from the line of Deepak Lalwani from Unifi Capital.

Sir, I just wanted some clarity on which OEMs have given you new business? What is the quantum of the business? And when should it start ramping up?

As I told you that from next quarter, it will start increasing. And by '25, '26, whatever we have been, I mean, allotted. You see in automotive industry, at least 2 to 2.5 years before they start a new model, they decide the supplier. And then accordingly, they take step by step. Now whatever we have got, like there is one new quality, which we have introduced, and we are the only supplier in USA to Stellantis company, a big company. But that plan is going on. They have just put up some few 1,000 cars. Now every quarter, they will increase it. why I'm saying '25, '26? By '25, '26, they will all be in top. I mean whatever I have got the orders, those orders will be completely start executing.

And sir, what will be the quantum of the order? [Foreign Language]

[Foreign Language] they buy it in America also. Because they are very happy. Mercedes is happy. Continuously Mercedes, we are supplying 30,000 meters every month from last 1.5 years. There is no problem. They are all happy. They want to -- they are chasing us that we should start supplying from there also. They are very much interested. But in automotive, suppose you are supplying a particular model, to change that model to other customers, it costs them hell of money. So until and unless they see that my new supplier is having a good gap of the prices or other benefit because [Foreign Language]. So they have to get assured also [Foreign Language] whether you will be able to continue with this price. So there are so many factors. [Foreign Language] 42% difference, in nine months. [Foreign Language].

In the domestic market, replacement market [Foreign Language] so is that a permanent issue? Or it's a temporary phenomenon where you could -- you expect that volume will come back?

Auto OEM local, domestic [Foreign Language].

We are telling you about the auto OEM in domestic.

Auto OEM in domestic. [Foreign Language]. Now government wants that in the back seat also, there should be an airbag. [Foreign Language] because there in the OEM, they will do it. But in replacement market, they are finding out some solution. [Foreign Language] but it is very slow. [Foreign Language] This matter will be solved, but I don't know whether in 3 months or 6 months. But still I'm telling you, I'm not depending on Maruti. Now I have started with other customers also, other OEMs also to go and try to influence them for retail market and same 1 or 2, I don't remember the name of the customer -- OEMs, they have already started. [Foreign Language] requirement is so fantastic, so high. And for complete seats, they are giving 1 seat free. [Foreign Language] So we are trying to capture other areas also. But then again, that will go slowly. [Foreign Language] They have to do and they will do. It's a matter of time. [Foreign Language], I can't say. [Foreign Language] So this is -- you see you are dealing in different kind of market. Every market, [Foreign Language] more than 55%, we were selling to footwear industry. [Foreign Language] Why have we started furnishing? [Foreign Language] And this will be [Foreign Language] given that range to our -- we have subsidiary in America. We have given those range in America also. And they are showing it to our customers. They have started coming up. They say, okay, material is very good, we'll start. [Foreign Language] That's why they are getting. [Foreign Language] Because of our quality that we don't compromise at any cost with the quality. [Foreign Language] It pays in the long run. [Foreign Language] What I'm trying to say is [Foreign Language]. We are the only supplier. Because we have taken the pain, 10 and 12 years before, I spent more than INR 10 crores on machinery, on testing equipment and all those things. [Foreign Language] Rest assured, Mayur will not leave any stone unturned, but it will not compromise with the profitability. This is for sure. [Foreign Language] So what I'm trying to say is that please don't go too much on what I'm saying. I'm saying only whatever our customers are saying. [Foreign Language] We are all giving it. [Foreign Language] We are trying our best. Whatever prediction we're giving according to our customers, because we are B2B. In B2C, yes, [Foreign Language] luckily it is increasing. [Foreign Language] So I think it is just like 25,000 or 35,000 meters of my business. [Foreign Language] Mayur is trying all the parts, all the areas wherever it is possible. [Foreign Language]. Okay.

Your question is answered? Yes, now the time is over, I think. You close the call.

We proceed to the next question now?

No, no, no. Time is already over I think. Last question, you can take the last question.

So the last question is from the line of Chirag Shah from White Pine Investment Management Private Limited.

Sir, in fact I have 2, 3 connected questions, a clarification on earlier one. Sir, first question is you mentioned that there are more capacities coming up. So can you talk a little bit about this? So what kind of capacities and what size and who are putting up? Is it more regional thing? It is more or it is some large...

[Foreign Language]. But in course of time [Foreign Language] it's not -- it is impossible in our industry [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] Is it more automotive, more footwear in nature or is it non-automotive? [Foreign Language].

Non-automotive [Foreign Language]...

Sorry for the inconvenience. We have lost the line for the management. Please hold as we connect them. Ladies and gentlemen, thank you for being on hold. We have the line for the management being reconnected now. And we also have Mr. Shah in the queue.

Sir, second question was on [Foreign Language] how it will have positive impact? And what is the kind of pace [Foreign Language]? It would be helpful.

[Foreign Language].

[Foreign Language].

[Foreign Language] Now they are all scared [Foreign Language] now in footwear also and leather goods also, I am going to the big brands for which we have already started working and [Foreign Language] in course of time [Foreign Language].

Currently big buyers [Foreign Language].

Of course, that is the change that will happen. Know, that is what we are trying to highlight.

Correct, correct.

[Foreign Language] Can you believe? We are exporting only 7% of the world's requirement.

No, no, sir. My question is if domestic market non-automotive [Foreign Language] because you will substitute some import or it will be more quality [Foreign Language]. So why would BIS significantly be beneficial for even at least in non-automotive market? [Foreign Language]. For players like Mayur Uniquoters? [Foreign Language].

[Foreign Language] Now I'm going to the big brands. Nowadays, there are at least 4, 5 big companies who are manufacturing for these big brands, and they are selling to them only. [Foreign Language] I want to open my areas as much as possible. [Foreign Language] I'm not going to compromise with the profit. I don't want to sell just like that, what people are saying [Foreign Language]. I don't want to do that kind of business.

So that was the last question. I would now like to hand the conference over to the management for closing comments.

Now from management, I would like to say that I'm very happy that I got a chance to listen to our customers, what they want, what is our drawback, what we should do. And as I explained you, how we are moving forward and how we can retain our position as #1. And rest assured that from our company's side, we will not leave any stone unturned. And definitely, when the things are moving in the right way today or tomorrow, you will get the result, which we are getting already. Thank you very much for giving us time. Speak to you next time. Thank you.

Thank you.

Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.