Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mayur Uniquoters Q4 FY '24 Earnings Conference Call 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, sir.

Yes. Thank you, Yusuf. 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 will now hand the call to Mr. Vinod Sharma for 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. It's a great pleasure to address you as we reflect on the past year and look forward to the future of the company. Your support and trust in Mayur Uniquoters have been instrumental in our success, and we are honored to share with you the performance of Mayur. Thanks for giving your precious time to join Mayur Uniquoters Limited Q4 FY '24 Conference Call. Mayur Uniquoters being a market leader in the synthetic leather industry and an nice player has been able to leverage the emerging opportunities and delivered exemplary performance in past years both in national as well as international business markets. Now I would like to start with financial highlights for Q4 FY '24 under review, and we will also give replies to your queries after our review on the financial advice -- results of the quarter. The company has achieved the revenue from operations on consolidated basis is INR 220.89 crores, PBT INR 39.93 crores and PAT, INR 32.15 crores. In the quarter, the consolidated revenue increased by 24%. PBT and PAT have increased by 10% and 18%, respectively. The revenue from operations on a stand-alone basis is INR 216.1 crores; PBT, INR 39.7 crores; and PET, INR 31.98 crores. And in this quarter, the revenue increased by 24% and PAT increased by 9%. Our endeavor is to make the company a preferred supplier for the leading OEM, especially U.S. and European regions. [indiscernible] informed earlier that we have been selected and received some good orders for OEM supplies to new orders in export markets. And based on that, our OEM export sale is expected to increase further in this year as well as coming 2 years. And the supply to some new hurdles has already started and some orders is expected to start in coming quarters. So we are hoping for a good performance in these 3 years. Also considering the continued request from our export OEM customers, especially in the U.S., we have seen and finalized the industrial land to start with warehousing facilities and finishing facilities later in Mexico, near U.S. border soon. And land acquisition process will be completed after the required legal formalities done in Mexico. Further to start the general business and European regions, we are also planning to establish a subsidy company soon in Lithuania, Europe to cater and supply our products to nearby countries in Europe. While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities towards society. Under the corporate social responsibility program, we contributed towards the regular plantations and having a plan to do it at large scale in coming years. The company has also adopted many happy schools for education of children. The company has worked on education for all people and underprivileged children, various health care initiatives, especially child skill development, water for all, sanitation in school area, distribution of books, bags, clothes, and et cetera. And most importantly, family planning and family welfare schemes in the villages. The state government has also recognized these initiatives on various platforms. I'm thankful to all the investors for their valuable time to those who became the part of this earnings call. With this positive note, I would like to conclude and request you all to open the forum for request. And I also request you that the conference call time is 45 minutes, therefore, kindly avoid repeated questions, and we will not discuss volume data. So please avoid volume-related queries. Thank you. Yes, over to you Rahul.

[Operator Instructions] First question is from the line of Shoumik Ganguly from Aditya Money Limited.

Yes. Sir, as you mentioned, revenue, EBT and PAT had an increase. So what would be the qualitative reason for it?

EBT has increased. Revenue has increased. PBT, that has increased for those reasons.

So is the market improving. We have good sales in automotive industry, so doing good and export is doing very good. That's the main reason.

Next question is from the line of [ Ritika Gupta ], an individual investor.

So I just wanted to know that can you elaborate on where the growth has come from? How has the footwear industry done in this quarter? How has the export OEM done, auto OEM domestic as well as the furnishing industry?

See, every area has done good except footwear industry. Because there was one regulation by Government of India, BIS specification, that in every footwear they have to use the BIS specification, which people were not ready for that. And because this cycle is a very big cycle, manufacture, supply to a wholesaler, wholesaler supply to the retailer, then from retailer, it comes to the consumer. Now because of this regulation and those existing stocks, they are so high that they have to consume the stocks, which is without BIS. So to liquidate those stocks, they have their production, they have reduced. That's why the sale was down.

Okay. And sir, can you give us the breakup for export OEM or domestic auto OEM footwear, furnishing for this quarter, please, in terms of value, not volume?

Yes, please, note done.

Yes.

Overall, overall export volume is INR 66.62 crores in export, and the INR 147.58 crores in domestic. So would you like to have more breakup?

Yes, yes. In domestic, can you give us auto OEM or auto replacement footwear?

Auto OEM, INR 52 crores; replacement, INR 40 crores; footwear, INR 48 crores; and others, you can take INR 8 crores.

Okay. Sir, can you also tell us what is the outlook for the export OEM and whether the BMW order has contributed to the growth in Q4, and whether it's a fixed price contract? And how do freight costs impact us?

Outlook for export future is very good. OEM export is good, general export is good. They're looking good.

And what kind of growth can we envisage in export OEM for this coming year?

20% you can consider in export OEM. And export general, we can -- you can consider 20% to 25%.

20% to 25% export and 10% to 15% is local.

Local, domestic OEM.

Okay. And as per the numbers that you gave us, sir, the footwear industry is showing a growth year-on-year in terms of Q4 FY '23 and Q4 FY '24. You mentioned INR 48 crores of sale in footwear domestic versus INR 33.6 crores, which is Q4 FY '23, which I have the numbers.

In Q4, it has increased numbers in footwear, certainly. But overall, if you see the comparison of that...

Yes. The whole year is down.

Yes, it's down.

[ 156 versus 189 ]. So what is the outlook going forward? Can we see this run rate for Q4 continuing or we will see a dip again?

No, it will footwear will not increase much. But on footwear, we are working in very details with global brands. A local brand, there is too much competition also, and people are working with very, very little margin, which we don't want. So we are working on global brands, and we have already started working these brands. People have started visiting our factory. And hopefully, will start increasing. It will take some time, but this will be a big leap in course of time because these -- once you are approved to these big brands, they can recommend you for the whole world, wherever they are manufacturing. So the chance is very good. We have a very good lead, but it will definitely take time. Because they have so many processes that it takes a long time to get approval then to get a business. But I think in next 3 years' time, this business will start increasing. And it will start every year, but after 3 years, we will see the big jump.

Okay. And what about the BMW order? Has it contributed to our Q4 revenue?

Yes, it has contributed, but not much because they are buying in Thailand only. Now they are starting in South Africa from this year. This year, it will increase, the quantity.

Okay. And is it a fixed-price contract? Like how does freight costs -- have freight costs impacted us in this Q4? And do we see them going forward also impacting us?

Yes, it is a fixed-price contract and freight cost. It's a temporary phenomena actually when it increases because of certain reasons, and now it is coming.

Okay. And is it possible also to give us the PU revenue for this quarter?

PU, around INR 6.5 crores in last quarter.

Okay. And what about the investment that you mentioned of up to INR 30 crores in America? I understand it's for warehousing facilities, but is it going to like increase revenues? Or what is the purpose? And when can we see it?

Actually, we are taking this land for -- starting -- to start with the warehousing capacities and later, we'll use it for manufacturing capacities.

Okay. We are planning to set up a manufacturing?

Yes, yes, yes.

Next question is from the line of [ Uday Kumar from U.K. Capital ].

Sir, despite good scale of business and exports doing well, why the margins contracted this time? It should have been gone up, right? And any margin expansion we're looking forward? Or...

Yes, definitely, margin is also good in this quarter also, and it will further improve in coming quarters because of increase in the exports. But this quarter, because we have taken -- considered some provisions on account of materials and employment benefits and all, that's why it is disclosed. Otherwise, it is better than last quarter.

Any pain on the raw material side, sir, and how does -- moving forward?

No such a special pain in raw material side.

Next question is from the line of Rishab Bothra from Anand Rathi.

Sir, I wanted to understand, though, I believe in each of the calls mentioned that it takes time for approvals and things will follow sooner than later. But what I see is from 2016 to 2021, our sales have been in the range of INR 500 crores to INR 600 crores, up and down plus minus 10%. And margins were around 27%, came down to 20%. Last 2 years, we have seen healthy growth in revenues. But was it because of volume or price increases? First question. And the offtake which we are mentioning last 2, 3 years, with automobile giants, a lot of orders going in. How are those pipelines shaping up? And when will we reach back to the margin trajectory of 25%, 26% plus? Sir, I'm mentioning a full year, not the quarterly Q4. Overall margin in FY '24.

Sir, you take one by one question, okay? It's easy to reply.

Sure, sure. First one is on the revenue front. We were in the range of INR 500 crores to INR 600 crores, now increased to INR 800 crores.

Yes, '21, we were ranging between INR 500 crores to INR 600 crores, correct. You are absolutely correct. And margin was around 24%, 25%. Okay, now for the last 2 years, and we are increasing in revenue terms and our margin was also increasing...

Margin has come down, cooled off.

If you look at 2022, '23, 18%, 19% is the margin. So around 400 to 500 basis point reduction is there in margins -- operating margin.

He is comparing with the '18, '19 margin.

Lot of things have been the changed.

Last 7 years, a lot of things have changed. So '18, '19 margin, abnormally high.

I have to discuss about the last year and this year and the future year, what has happened 4 years back and now this is happening, it is very difficult to reply.

Do you mean to say we will not be able to scale up to those levels of margins. These 20%, 21%, 22% is a normal level now going forward?

Yes. And you can take that the last year margin was better than years back. I think, 21% '22 and 22% '23 is better. Now 23% '24 is better than last year. And we are expecting improvement in margin as well as revenue in coming 2, 3 years, it's basically in 2, 3 years.

And in terms of the revenue increase, is it because of volume increase? Or is it because of price increase of the commodity?

Both.

Both. And what is the scope for further increase in revenue? I mean, what is the spare capacity we have currently?

Spare, around 25% capacity is there, and we can easily go up.

And you mentioned PVC or PU?

Yes. PVC and PU, both.

So in PU, we are utilizing around 50%, 60% capacity?

No, no, no. I'm talking about average capacity. Average total capacity, okay? And in PU, we have subsequent 70%, 80% in spare. And PVC, we have 20%, 25%.

Okay. And I see the depreciation fees are increasing year-on-year from INR 22 crores to INR 29 crores in FY '24. So where has been the major expansion like or something has changed in terms of policy?

Some CapEx, we are incurring INR 30 crores to INR 40 crores on a year -- on an average every year. And for Gwalior, we have actually taken, considered, some additional depreciation on buildings and plant and machinery.

Next question is from the line of [ Pranav from Rare Enterprises ].

Sir, so if I had to -- a chance to look at the export data, and the market is very, very huge. And whoever is producing premium PU leather and PVC leather. All those geographies are high-cost geographies like Europe and U.S. So actually, your strategy fits the market opportunity perfectly in that you will only do in a high-value segment. Sir, the question is then, what it will take for us to crack this market very fast, because though the strategy is perfect, the speed is a little bit less than what it could have been. I know there are some onetime factors, but the market is huge. So for example, China is like $2.5 billion export. But they are exporting in $2 per kg market, whereas our realization is much, much better. So can you just highlight what we need to do to improve our revenue growth considerably?

Yes. The growth in export automotive. See, export automotive is growing, going very fast. And from this year and next 3 years, if we grow more than 2.5x to 3x, you see we -- in export OEM, OEM business is a very different business. It cannot be that just if I, like, can't increase any quantity in 1 year or 2 years. They have a process. Any new model they introduce, they introduced 2 years before. And accordingly, they allot. Now whatever allotment we have got now from this year, in the next 3 years, it will be 2.5x, which models we already have allotted to us. But naturally, we are increasing.

Actually getting the orders from automotive industry, it's very different from others.

And one thing to remember, automotive industry, suppose in a particular model, they have 2 suppliers, they will not change the supplier until and unless there is a problem with their supplier. So any new business is always coming from new orders, so that we are getting it successfully. Every quarter from now, every quarter, we will have some model in the next 3 years.

Right. But even in non-auto...

It has already been allotted.

Even in non-auto OEM, so for example, furnishing and fashion and every other category, these categories also have really high realization. And those are not as a step change like an auto OEM, right? So in those markets, in foreign export markets, what will it take for us to have a significant share? Because the way I realize is that 15%, 16% of market is each in fashion and furniture. So auto OEM is just 15%, 20% of the remaining 50%. Even in fashion and furnishing in global market is a huge premium market. So any steps there?

See, listen, so far as furnishing is concerned, see, general export is increasing about 15% to 18% every month. Now how it is increasing? Also, there are a lot of different type of market. One is you see footwear market, then it is what we call leather market and furniture market also. But furniture market is also like an automotive market. There also, they just don't like to buy just like that. It needs time. So we are working in these 3 areas, in general export, footwear, leather goods. And now we have got good success in marine business. They are doing hardly any marine business. Now it has started picking up because there is less competition in marine. So now people have accepted our material, and we have started supplying. One thing you must remember, it is not easy to just like that increase the business. Suppose you are buying something from somebody, I went as a new customer. You will first ask me for 1 year, 1.5 years that how is my quality, how is my supply. And then accordingly, you will keep on increasing. I can tell you in marine, we have got very, very good future. Because recently, in the last 1.5 years, we have participated in 4 different exhibitions for marine. So that has given us a very good exposure. So that will also come. You see there is a very good future for export, and there is a margin also. So we are working on that very seriously.

Next question is from the line of Awanish Chandra from SMIFS.

Congratulations, sir, on a strong set of numbers. Sir, a few updates. And first thing on the Mexico side, you have already explained many things in your place delays, but who will look after the business? What kind of growth potential and business we are looking at? Any ballpark figure on the business plan from the Mexico side?

Mexico. As I told you that the OEM export, which is mainly at the moment, concentrating on U.S.A. Now like BMW and Mercedes, we are already supplying to South Africa. Now they have told us that if you have a plant here, we'll give you the business of America also, which is double than South Africa. Volkswagen, we are supplying 100% in India, they have also said same thing. Nowadays, Americans are also preferring to have supplies from their own country because when we are supplying from here, the time period is too long. And then nowadays, market is very fluctuating. Certain model is running very good. Suddenly, it's reduced. Suddenly the model, which is less filling, that increased like anything. So they are avoiding to give us the future trend for 3 months, 4 months. They are bringing it down every year. So it has become necessary for us to have a unit over there, for which we are working.

So we will be recruiting people over the year or somebody will go from India, our management team, and look after all those business?

Ladies and gentlemen, we have lost the connection for the management. Please stay connected while we reconnect them to the conference. [Technical Difficulty]

Yes, Awanish, continue with your question.

Sir, I was asking -- so in Mexico, we will be recruiting people or management team, some senior person will go from here and they will look after the business in Mexico.

When we are starting the factory, we know what to do, where from the new people has to come, people have to go from here, we are working on all those things because, of course, we have to send people from here also. Then we'll get a good person from here from outside. So that we are looking already.

Okay, sir. And 2 very small update. One, BMW last time, we said that we will be starting in quarter 1 FY '25. So we are already in quarter 1 FY '25, so will it get delayed or this quarter, we are starting?

Listen to me, see, we always talk according to the projection of the OEMs but their projection always varies. And that varies is not big, maybe 1 quarter or 4 months, you can't help it. We tell you whatever they tell us. But that is there, the business is there. Business is allotted. You understand my point?