Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mayur Uniquoters Q1 FY '25 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. Thank you, Govind. 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 his opening remarks. And then we'll move to Q&A. Thank you, and over to you, sir.

Good afternoon, dear investors and analysts. It's a great pleasure to address you as we reflect on the past years 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 Q1 FY '25 conference call. Mayur Uniquoters 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 as well as international business market. Now I would like to start with the financial highlights for Q1 FY '25 under review, and we'll also give replies to your queries after our review of the financial results for the quarter. The company has achieved the revenue from operations on consolidated basis is INR 213.19 crores, PBT INR 51.37 crores, and PAT INR 37.38 crores. In the quarter, the consolidated revenue increased by 6%. PBT and PAT have increased by 29% and 22%, respectively, on Y-on-Y basis. The revenue from operations on a stand-alone basis is INR 194.74 crores, PBT INR 45.75 crores, and PAT INR 34.73 crores. In the quarter, the revenue increased by 1%. PBT and PAT increased 18% and 16%, respectively. Our endeavor is to make the company a preferred supplier for the leading OEM, especially in U.S. and European regions. As earlier informed, that we have been selected and received some good orders for OEM supplies to new orders and export markets. And based on that, our OEM export sales are expected to increase further in this year and coming 2 years. The supply to some new models has already started and some models is expected to start in coming quarters. So we are hoping for a very good performance in these 3 years. Also considering the continued request from our export OEM customers especially in U.S. we have selected and finalized the industrial land to start with warehouse testing [indiscernible] Mexico soon. Land acquisition process will be completed after the required legal formalities done in Mexico. Further to start general and furnishing segment business in European regions, we are also going to start trading activities soon through newly established subsidiary company, Lithuania, 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 to our society. Under corporate social responsibility program, we have contributed to our regular plantations and 30,000 plants already we have planted in nearby areas and have a plan to do it at a very 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 and underprivileged children. Various health care initiatives, especially child skill development, water for all, sanitation at the school area, distribution of school bags, clothes and most importantly, family planning and family welfare schemes in nearby villages. The state government has also recognized these initiatives on various platforms. And I'm thankful to all the investors for their valuable time, to those who became a part of this earning call. With this positive note, I would like to conclude and request you all to open the forum question. And before that, I'll also request our available investors that, due to time constraints, the duration of the call will be 40 minutes. Therefore, request you to kindly avoid repeated questions. We'll discuss -- we'll not discuss volume data, so please avoid volume-related queries. And I'll brief some -- give you some brief for numbers so that you can avoid the questions on numbers. In Q1 FY '25, we have export sale of around 32%, and domestic, 68%. And our total volume is 71.31 lakh meters, as compared to Y-on-Y basis of Q1 where we had the 70.41 lakh meters. Thank you. Over to Rahul. Please open the forum for the questions.

[Operator Instructions] The first question is from the line of Rachana from SIMPL.

Sir, can you please share the volume data for export volume OEM this quarter versus last quarter? For export OEM and OEM domestic.

We have already informed that volume data will not be discussed in the call. So please avoid. You can talk to us through mail and et cetera, and we'll tell you the value.

Okay, sir. But can you tell me as a percentage of total volumes, what would be export volume OEM and OEM domestic for this quarter compared to the previous year's quarter?

We have readily available with us the value percentage. Do you want to note the value percentage?

Yes, yes.

Yes, please. Export OEM is 21%, and domestic is around 39%, 40%, you can consider as compared to the last quarter Y-on-Y basis, Q1.

And the total contribution?

Total contribution of what?

Total out of 71, export volume would be 21% or the growth?

Yes. Value. Export value is 21%. And 39% is the domestic OEM.

The next question is from the line of Ritika Gupta, an individual investor.

So my question is regarding the PU plant. Could you give us a capacity utilization for that? And what is the outlook for that?

PU plant is -- we are -- almost 1/5 we are using and we are working with a lot of big foreign brands to introduce our materials in the footwear and leather goods. And we are getting good response, hopefully. Here future is very bright. We have made a lot of -- hundreds of samples which has been given to these companies which are making the end products, they are showing to the customers, and the inquiry has started coming a little bit. And I'm hopeful that within a year's time, it will cover up the income.

Okay. Sir, my next question is regarding the footwear industry. So any progress we can see in that? Any green shoots we can see in that for ourselves?

Yes. Footwear industry also, as I told you, we are working with foreign brands. And these foreign brands use PU and PVC both. But so far as the market is concerned because of EIS problem, which government has implemented, people are not keeping the stock as they are required to keep. So that is still you can say it is affecting the market. But not much, of course.

Okay. My next question is, have we received any new approvals in this quarter? And what is the progress on our BMW order that were supposed to start in this quarter?

Already started. And by I think -- by October or November, we will get full-fledged order of 35,000 meters. That's what they're saying at the moment.

And what is the outlook for the domestic auto OEM industry? Like I was reading that Stellantis is planning to increase its exports a lot from India. Mercedes is eyeing double-digit growth in India. Do we see any -- like what do we see for our sales in the domestic OEM industry for the next 2 years?

As you have read and we are seeing everywhere that Indian domestic OEM industry is progressing very fast compared to other countries. So there is no way that we will lag behind. And so far Mayur is concerned, we are supplying to each and every manufacturer in India. Not a single manufacturer is left. So marketing is good I mean from an industry point of view. You see a little bit up and down comes in the quarters. That is different thing.

And what are the main reason for margin expansion in this quarter?

Main reason for the margin expansion.

Yes, margin expansion. You see margin expansion is one thing is export business, specifically OEM and then some domestic also, like Volkswagen we are supplying here, like [indiscernible] we are supplying here, like [indiscernible]. So, we have good margin there. Now you can say the reason is one is the product mix, and other is we are working very hard to reduce the costing and as well as increase the efficiency on growth. That is also one of the reasons.

But do we see this kind of margin...

Ma'am, may we request you to please rejoin the queue for further questions?

Sure.

We will proceed to the next question, which will be from the line of Dhruvesh Sanghvi from Prospero Tree. The current participant seems to have dropped from the queue. We'll proceed with the next question from the line of Himanshu Upadhyay from BugleRock PMS.

My question was on the PU side, we are only looking at domestic market as a market or that you are also looking for exports? And when you are saying about [indiscernible] brands, is it only for domestic markets or those are also export opportunities there?

For [indiscernible] brand.

For PU, when you were saying, so what is the export opportunity there?

Yes, there are always good export opportunity. This quarter export opportunity are all the brands are manufacturing in India. And in their brand name, they are supplying all over the world. So many factories are coming here in India to manufacture for these brands. And we are getting in touch with these brands, and they're making our samples and showing it to [indiscernible]. And there we are supplying the [indiscernible] export footwear and leather goods.

Okay. And sir, we were thinking about backward integration into the -- for PU. So where have we reached? And what is our output there and how much cost further reduce can happen if we are backward integrated?

Backward integration for PU.

No, no, we don't have any backward integration at the moment.

Yes. But we were planning for a backward integration for the fabric and...

No, no, planning that -- for that we have to make a PU resin and for that we made a collaboration and all the collaborators need a big market, Indian market is very small at the moment. Of course, we are working. But I don't know how long it will take to get there.

The next question is from the line of Awanish Chandra from SMIFS Limited.

Congratulations, management team, for continuing good performance and buyback announcement. Sir, my first question, Vinod, sir, anyway highlighted a few things about overseas investment and all. Sir, I just want to know, when we say Mexico land acquisition, then warehousing in future, you had highlighted that we will set up the plant. In terms of number, what would be the CapEx? What are the things we are planning? If you can show us some detail on those plans.

CapEx will be around INR 200 crores for that [indiscernible].

For the land plus plant, both?

Yes, yes, both.

INR 200 crores here?

Yes.

And what would be the capacity using that INR 200 crores?

Around 6 million meters.

Okay. 6 million-meter capacity we will have and INR 200 crores here. And sir, you talked about another geography also there, you want to establish something. What exactly was that?

It will be near border, U.S. and Mexico border, it will be.

Okay. And sir, bookkeeping question. INR 6 crore, INR 7 crore was the run rate for PU business in a quarter. So any change in that run rate or we are similar again in quarter 1?

Sorry, your question, we cannot get.

In PU business, quarterly run rate was INR 5 crores to INR 7 crores all the time. So in quarter 1, any different or we are having the same run rate, in PU business?

You see I have told you previously that we are working with big, big brands. The PU problem, main problem is this import duty manipulation in spite of increasing the duty, getting the increasing them in the duty from 10% to 12%. Terrible [indiscernible]. That's why we are not giving more concentration on this and we are moving to the high brand PU material, and their prices are also good. And they're confirmed by us. Although we are supplying to Indian market buying from China, buying from here and there. And once we are approved for these big brands, we will not go here and there, whatever pricing quote. So as I told, that it will take some time, but we are working hard on it.

Okay. And sir, 1 last quick question on PVC prices. Again, in quarter 1, it has firmed up. So do we have any plan to price increase? And how we are placing our inventory on PVC chemical side?

You see, price increase and decrease, depends on the market, like how market is moving. What is availability of the material in the market? If the availability is more, then the price goes down. If the availability is less, then price increases. So at the moment, in PU, the pricing are stabilized. Of course, in PVC, we have increased on prices because of the PVC ranges and plasticizer prices, we have increased 5%.

The next question is from the line of Rachana from SIMPL.

I wanted to know the sale we are doing in PU business and have we won any new orders?

New orders in what segment? For both the segments?

PU. PU, you see, it's not a question of new order or old orders. Orders are coming from different customers every time. Now the main thing is to discuss here are the big brands which we are talking, we have started working, asking the sample, we are providing the samples. And these things will come, then we will get a new customer. Otherwise, today in the market, we are selling, those who are exporting or buying in Indian market. So the customer always change.

Okay. Sir, we have -- have we incurred any losses? Or we are positive in PU business?

Yes. Currently, we are incurring losses.

Sorry, sir, you were not audible.

Yes. Currently, we are incurring losses in PU business.

Okay. Can you quantify if possible?

No, that's not right now possible.

The next question is from the line of Nirali Gopani from Unique PMS.

Just to clarify, sir, did you mention that the increase in the margin was largely because of the OEM export growth?

Yes. Increase in margin because of OEM export growth and export -- and domestic...

As I told you there is a source benefit not because of the market situation or anything. We have [indiscernible] and we are trying to reduce the cost at our end. At the same time, in export margin is better than local.

Sir, the reason I'm asking the question is...

You see [indiscernible] margin, there are so many factors, not 1 factor, right? The business, what kind of business we are having. And then the contribution in the different type of products. So X product has got X profit, Y product has got X plus Y profit. So it depends on composition of the business also, of the article once. We are in leather clothes. We are making 1,000 different articles. So in general, it is very difficult to explain. Do you understand my point?

Yes, sir, I understand.

Depends on the composition of the business also.

Because this kind of margin we have seen after many, many quarters, hence, the question on margins. Sir, do you feel that this number is sustainable and we can see further growth from this number?

No, you see as I earlier said it is very difficult to see what margin will be there or not. Any manufacturer will always try, and we always try to increase our margins. There are so many ways of increasing margin or reduce margin. It depends on market. You see our job is to work as best as possible, to go for the best customer who can give a good price. We are always trying to move on them as to give more time to them, then increase the efficiency. Now this time -- and there is one -- another thing very important. You see when price increases, you should know when you should buy. This time, that is also there because the prices of raw material increase, so many times we have made the stock of [indiscernible] material. So that when the prices increase after 1 month or 1.5 months we get benefit in our purchase also. Our profitability is a mix of everything.

[Operator Instructions] The next question is from the line of Alisha Mahawla from Envision Capital.

[Foreign Language]

Q1 '24? Sure. Sure. It was -- export was 35% and domestic was 65%.

[Foreign Language]

OEM export and domestic? 24% OEM export and 36% domestic.

[Foreign Language] growth on Y-o-Y basis [Foreign Language] which led to the improvement in margin and the [indiscernible] order also scaling up.

Y-o-y growth [Foreign Language].

Domestic OEM [Foreign Language]?

Yes.

And our aspiration for '25, 15%, 20% growth [Foreign Language] is that looking possible [Foreign Language]? outlook for '25?

Growth will be better.

Better than '24.

Up to 15% minimum growth will be there.

Double digit.

[Foreign Language]

It is in process. [Foreign Language]

[Foreign Language]

[Foreign Language]

Actually, the Mexico business is totally dependent on U.S., and there is NATO arrangement between Mexico, Canada and USA, right? So they have recently election in Mexico and the new government has come. So we have to see how this government moves for 3 to 6 months. And then in December, America is coming with an election. So by January, February, the whole picture will be clear.

[Foreign Language]

[Foreign Language]

The next question is from the line of Ritika Gupta, an individual investor.

My question is, again, on the export outlook, because I think you just mentioned to the previous participant that you expect a double-digit growth this year. So then are we on track to achieve the 3x export target that we had set a little while ago in FY '26, which is about INR 450 crores?

Export OEM growth.

Yes. Export OEM growth this year compared to last year will be at least 15% more. And the next year, it will be another 15% to 20%. It will keep on growing at least 15% in the next 3 years. And this I'm talking with the current situation, the orders in our hand, but sometime it fails because sometimes the market is bad, right? Last month, the market was not good in America, but now it is again improving. So whatever I'm saying you according to the requirement given by the OEMs. And accordingly -- and then it is not the imagination. It is just we have got the order in hand, right, according to their models.

Okay. And you are very bullish on marine in the last quarter call, on the marine business.

Yes, marine business is improving. It's improving.

Okay. So it falls under export general, right? And what is the contribution of marine business in our total export mix?

We have -- this is -- we have got export OEM separate and export general is separate. This marine business is in export general. Until now, it was just negligible, but now it is increasing gradually.

Okay. And where do you see this going in the next 2 years? Like do you see it becoming like 20% of exports or that is farfetched?

You see, it is very difficult to say that how much percentage of this. We are going in all the segments very seriously. So it is difficult to say 20%, 30% or 40%. We are trying our best, and we are doing -- and I can say, in world of yards, it is increasing. [Foreign Language] Every month, it is on increase. You see, any new customer, they just like that, they don't buy the material, but they want to have the confidence on the supply. My material is very good, my price is very good. But still, they will try for 6 months, 1 year. And then gradually, they will increase. One thing I can say, wherever our material is going, they are accepting our material, and they are increasing it.

Okay. I got it. And my last question is, have you got any new approvals this quarter?

Approval for what?

Any new OEM approvals this quarter?

New approvals. We already have approval. You see, at the moment, in India, as I told you, we are working all the domestic automotive companies, not left 1 company.

The next question is from the line of Dhruvesh Sanghvi from Prospero Tree.

[Foreign Language] domestic manufacturing base for footwear [Foreign Language].

[Foreign Language] There is a big question with footwear manufacturers. [Foreign Language] Now the problem is in footwear, the growth is there, and it will be. But the main thing is that we are exporting in India 95% of the leather footwear [Foreign Language] And in non-leather, India is backward at the moment. Of course, they are increasing, every year, it will increase. But they have to go on non-leather products on which they are very slow. But now they are doing it. [Foreign Language] India is holding only 4% of the manufacturing where China is exporting 46%. And then their internal consumption is so high. Of course, we are working hard. Government has [indiscernible] that whatever support you want, because [Foreign Language]. So government is ready to support. Now these footwear people has to change their ideas. [Foreign Language] Not even 1% or 2%. Now with my pressure at least they have started it, and they started supplying to the big brands. [Foreign Language] government or footwear manufacturer [Foreign Language]. It's a question of will.

[Foreign Language] it is also about the mindset of the manufacturers and the ecosystem.

[Foreign Language] Why? The reason is that mindset. [Foreign Language].

We will now move to the next question, which is from the line of Nikhil from SIMPL.

One clarification. [Foreign Language] Last year similar quarter [Foreign Language]?

70. 70.

Last year similar to 1Q '24 [Foreign Language]?

70.41 lakh meters. And this year Q1, 71.31 lakh meters.

Okay. So volume [Foreign Language] or auto OEM export or auto OEM domestic [Foreign Language]?

[Foreign Language] Around 7%, 8% [Foreign Language].

[Foreign Language]. If we consider our realization, [Foreign Language] is it like PVC prices are passed through or how does your pricing work?

You see OEM prices always subject to dominant 2 or 3 raw materials. On the basis of that, prices are described. And every quarter, there is a choice. If the prices increase, we will increase the prices. If it will decrease, we will decrease the prices. Automotive has got a very [indiscernible].

Okay. Last question, sir, auto replacement or footwear [Foreign Language] has further seen a degrowth. Will that be right?

No. Footwear has also increased in this quarter.

Volume-wise?

Volume wise and value wise.

The next question is from the line of Nisarg Vakharia from NV Alpha Fund Management.

Sir, thank you for all the insights that you gave on what the industry is lacking and what we are doing, and we are ahead of the curve. You mentioned that you have been a sort of visionary in setting up this -- hello? Yes. Can you hear me?

Yes, We can hear you.

So you mentioned that the PU plant is still operating at a loss. Before 2019, we used to do 25%, 26% margin, and today, we are at 21%, 22%. Is that margin differential because the PU plant is at a loss?

[Foreign Language]

Fixed cost, okay.

[Foreign Language]

[Foreign Language] all the orders that you have are already in hand. When does that fixed cost operating leverage start playing out for you?

Orders are in hand, he told about the OEMs, domestic and exports.

Yes. So there will be a point where the fixed cost operating leverage will play out, right, and we will stop making losses?

Not for PU. It's for PVC.

Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you very much all of you who joined this conference. And we have tried our best to explain you at where we are and what we are doing forward. In a nutshell, I can say that we are trying our best and we are trying to grab the opportunity all over the world wherever we find it is important to have it and get the more profit. So that endeavor will continue and we will definitely grow from double digit. No doubt. And we are -- in a nutshell, I can tell you, we are not leaving any stone unturned. And we'll keep on doing that. Thank you, all of you for joining us and for your questions.

Thank you.

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