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BUY
TP: Rs 445 | 26% MAYUR UNIQUOTERS | Textiles | 24 August 2017
While Mayur Uniquoters (MUNI) posted modest Q1FY18 results with Arun Baid
revenue/PAT growth of just 8.8%/4.1% YoY, we reiterate BUY given +91 22 6138 9300
arun.baid@bobcaps.in
(1) stronger traction in both domestic and export auto markets, (2) an ongoing
revival in the footwear segment and (3) the planned commissioning of new
PU/PVC plants in H2FY19. Management expects double-digit growth in FY18
with stable margins. We model for a revenue and PAT CAGR of ~17% each over
FY17-FY20 and have a Sep18 TP of Rs 445 for the stock set at 19x fwd P/E.
Result highlights: MUNI reported Q1FY18 revenue growth of 8.8% YoY to Ticker/Price MUNI IN /Rs 353
Market cap US$ 253mn
Rs 1.4bn with volumes rising ~9% YoY. Growth was backed by higher domestic
Shares o/s 46mn
auto market sales (+34% YoY) and exports (+20% YoY), whereas footwear 3M ADV US$ 0.3mn
revenue declined ~4%. EBITDA margins contracted 110bps YoY to 28.8% 52 wk high/low Rs 462/Rs 311
primarily due to lower gross margins (160bps), limiting the growth in operating Promoter/FPI/DII 61%/22%/6%
Source: Bloomberg
profit and adj. PAT to 4.9% and 4.1% YoY respectively.
Footwear revival ahead: MUNI has posted modest growth over the past two
STOCK PERFORMANCE
years due to a decline in the footwear segment (40% revenue share). With the
Mayur Uniquoters
GST rollout, we expect a shift in this highly unorganised market towards 500
450
organised players, which should support a 9.8% revenue CAGR for MUNIs
400
footwear business over FY17-FY20. MUNI has guided for commissioning of the
350
PU and PVC plants by Q3FY19 and Q4FY19 respectively, lending further 300
Sep-16
Aug-14
Jan-17
Aug-17
Mar-15
Feb-16
May-17
Jul-15
Jun-16
Dec-14
Nov-15
growth visibility.
Auto continued momentum: MUNI is the market leader in Indias PVC Source: Bloomberg
synthetic leather industry and also caters to US auto OEMs a market which
no other domestic company has managed to penetrate. We expect continued
momentum in the automotive business due to the addition of new customers
and higher orders from existing clientele.
KEY FINANCIALS
Y/E Mar FY16 FY17 FY18E FY19E FY20E
Net profit (Rs mn) 768 743 852 946 1,185
EPS (Rs) 16.8 16.2 18.6 20.7 25.9
EPS growth (%) 23.0 (3.3) 14.7 11.1 25.3
ROE (%) 24.8 20.6 20.5 19.8 21.7
P/E (x) 21.0 21.8 19.0 17.1 13.6
EV/EBITDA (x) 12.1 11.9 10.6 9.3 7.6
Source: Company, BOBCAPS Research
Sep-16
Jan-17
Aug-14
Aug-17
Mar-15
Feb-16
May-17
Jul-15
Jun-16
Dec-14
Nov-15
Source: Bloomberg
QUARTERLY PERFORMANCE
(Rs mn) Q1FY18 Q1FY17 YoY (%)
Total revenues 1,408 1,294 8.8
Total raw material consumed 793 708 12
% of sales 56.3% 54.7% -
Employee expense 67 73 (8)
% of sales 4.8% 5.6% -
Other expense 143 127 13
% of sales 10.2% 9.8% -
Total expenditure 1003 908 11
% of sales 71.2% 70.1% -
EBITDA 405 386 4.9
% of sales 28.8% 29.9% (108bps)
Depreciation 42.3 41.7 1
Other income 23.5 24.4 (4)
Interest cost 2.2 4.2 (48)
PBT 384 365 5.3
Taxes 128 118 8
Effective tax rate (%) 33.2 32.4 -
APAT 257 247 4.1
Source: Company, BOBCAPS Research
The new PVC leather plant in Madurai, Tamil Nadu, will be commissioned by Q4FY19 and
will entail capex of Rs 400mn-500mn. This plant would enable the company to move closer
to its customers and thus lead to higher volume offtake as well as customer addition.
MUNI has Rs 1.4bn of cash on its books as of 30 Jun 2017. Management plans to meet the
planned capex primarily from internal accruals, though some loans would be taken for the
machinery to avail of the subsidy benefit from TUF (Textile upgradation fund).
Management plans to keep the revenue contribution from footwear at 40% levels and is
focussing more on the automotive segment which has better margins and higher
growth prospects.
The company has seen increased demand from the footwear segment post-GST and is
hopeful of witnessing growth here in FY18. Footwear segment revenues increased
~23% QoQ and the trend looks healthy in Q2FY18 as well.
Auto major Mercedes has conducted an audit of the company in Mar17 and another audit is
scheduled for November. Orders from Mercedes may come in from FY19 upon successful
completion of these audits.
MUNI expects strong growth to continue in the domestic automotive replacement market
going ahead. However, the demand for furnishings has witnessed a slowdown due to
demonetisation and GST implementation.
(Rs mn) Revenues % growth (R) (Rs mn) Exports % growth (R)
28%
10,000 23% 30% 2,500 35% 40%
22%
2,057
8,000 7,761
6,056 20% 2,000 1,793
5,063 1,563 30%
6,000 4,696 4,956 4,817 5,325 1,439
1,500 1,283 1,323
3,805 10%
4,000 14% 1,082 15% 15% 20%
(2%) (3%) 11%
8% 0% 1,000
2,000 19% 9% 9%
10%
500 3%
0 (10%)
FY13
FY15
FY14
FY17E
FY18E
FY20E
FY16E
FY19E
0 0%
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, BOBCAPS Research Source: Company, BOBCAPS Research
FY14
FY16
FY17
FY11
FY13
FY15
FY12
FY18E
FY20E
FY15
FY12
FY14
FY16
FY20E
FY13
FY17
FY18E
FY19E
FY19E
PVC SYNTHETIC LEATHER VOLUME (MN METERS) PVC SYNTHETIC AVERAGE REALISATION (RS/METER)
(Mn meter) Sales % growth (R) (Rs/Meter) Avg Realizaiton % growth (R)
40 25% 213 213
19% 32.6 215 4.2% 6%
29.1 20% 209
30 14% 26.2 210 205 4%
23.2 24.3 23.9 206 207
21.3 15%
20 10% 205 3.5% 200 2%
17.9 200 2.3%
11% 12% 2.2%
9% 5% 200 0%
10 9% (2%)
5% 0% (0.4%) (2.8%) 0.3%
195 (3.4%) (2%)
0 (5%)
190 (4%)
FY13
FY17
FY15
FY14
FY16
FY18E
FY20E
FY19E
FY15
FY18
FY14
FY16
FY19
FY13
FY17
FY20
E
E
With domestic footwear demand expected to revive for organised players and continued
traction in domestic/export automotive markets, we expect MUNI to witness a
revenue/PAT CAGR of ~17% each over FY17-FY20 along with strong return ratios
(ROE/ROCE of 21.7%/20.4% in FY20).
MUNI does not have many directly comparable peers its closest peer set would be
footwear-related and auto ancillary companies.
PEER COMPARISON
Mkt Cap PAT CAGR (%) PER (x) EV/EBIDTA (x) ROE (%)
Company name
(Rs mn) FY17-19E FY19E FY19E FY19E
Bata India 85,824 22.1 33.4 20.3 16.1
Relaxo Footwear 59,465 19.3 33.8 18.5 18.6
Bharat Forge 2,67,236 28.7 26.6 16.3 18.7
Amara Raja Batteries 1,32,756 16.8 20.4 11.6 19.7
Exide Industries 1,72,168 14.3 19.0 11.3 15.4
Average - 20.2 26.6 15.6 17.7
Mayur Uniquoters 16,322 13.0 17.1 9.3 19.8
Source: Bloomberg, BOBCAPS Research
MUNI has traded at an average P/E of ~19x one-year forward over the past five years
(three-year average P/E of ~24x) and we believe valuations are sustainable. We recommend
a BUY on the stock with a Sep18 TP of Rs 445 (19x P/E Sep19).
500
400
300
200
100
0
Sep-14
Jan-13
Aug-17
Aug-12
Feb-15
Mar-17
Oct-16
Jul-15
May-16
Apr-12
Apr-14
Jun-13
Dec-15
Nov-13
Key risks
Competition from unorganised players: MUNI operates in a highly fragmented market with
several unorganised players who may pose stiff competition and erode the
companys growth.
FINANCIALS
Income Statement
Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E
Total revenue 4,956 4,817 5,325 6,056 7,761
EBITDA 1,293 1,278 1,400 1,569 1,994
EBIT 1,132 1,111 1,204 1,349 1,703
Net interest income/(expenses) (26) (27) (6) (7) (5)
Other income/(expenses) 59 43 93 92 98
Exceptional items 0 0 0 0 0
EBT 1,165 1,127 1,290 1,434 1,796
Income taxes (397) (385) (439) (487) (611)
Extraordinary items 4 46 0 0 0
Min. int./Inc. from associates 0 0 0 0 0
Reported net profit 772 789 852 946 1,185
Adjustments (4) (46) 0 0 0
Adjusted net profit 768 743 852 946 1,185
Source: Company, BOBCAPS Research
Balance Sheet
Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E
Accounts payables 375 460 474 555 806
Other current liabilities 184 220 218 280 358
Provisions 113 25 122 139 178
Debt funds 276 120 70 80 50
Other liabilities 50 42 42 42 42
Equity capital 231 229 229 229 229
Reserves & surplus 3,125 3,620 4,216 4,879 5,566
Shareholders' fund 3,356 3,849 4,445 5,108 5,795
Total liabilities and equities 4,354 4,716 5,371 6,204 7,229
Cash and cash eq. 1,163 1,417 1,594 1,151 1,532
Accounts receivables 987 969 1,132 1,191 1,743
Inventories 649 835 741 985 1,099
Other current assets 130 172 178 220 290
Investments 0 0 0 0 0
Net fixed assets 1,321 1,258 1,662 2,592 2,500
CWIP 79 39 39 39 39
Intangible assets 26 26 26 26 26
Deferred tax assets, net 0 0 0 0 0
Other assets 0 0 0 0 0
Total assets 4,354 4,716 5,371 6,204 7,229
Source: Company, BOBCAPS Research
Cash Flows
Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E
Net income + Depreciation 933 956 1,048 1,166 1,477
Interest expenses 26 27 6 7 5
Non-cash adjustments (14) 0 0 0 0
Changes in working capital (210) (177) 35 (185) (368)
Other operating cash flows 0 0 0 0 0
Cash flow from operations 735 805 1,089 988 1,114
Capital expenditures (159) (65) (600) (1,150) (200)
Change in investments (212) (227) (253) 350 (400)
Other investing cash flows 0 0 0 0 0
Cash flow from investing (371) (292) (853) (800) (600)
Equities issued 0 (253) 0 0 0
Debt raised/repaid (185) (155) (50) 10 (30)
Interest expenses (26) (27) (6) (7) (5)
Dividends paid (141) (41) (255) (284) (498)
Other financing cash flows (86) (10) 0 0 0
Cash flow from financing (437) (486) (312) (281) (532)
Changes in cash and cash eq (73) 27 (76) (93) (19)
Closing cash and cash eq 193 220 144 51 32
Source: Company, BOBCAPS Research
Per Share
Y/E Mar (Rs) FY16 FY17 FY18E FY19E FY20E
Reported EPS 16.9 17.2 18.6 20.7 25.9
Adjusted EPS 16.8 16.2 18.6 20.7 25.9
Dividend per share 3.5 1.0 4.7 5.2 9.1
Book value per share 72.5 84.1 97.1 111.6 126.6
Source: Company, BOBCAPS Research
Valuations Ratios
Y/E Mar (x) FY16 FY17 FY18E FY19E FY20E
EV/Sales 3.1 3.2 2.8 2.4 1.9
EV/EBITDA 12.1 11.9 10.6 9.3 7.6
P/E 21.0 21.8 19.0 17.1 13.6
P/BV 4.9 4.2 3.6 3.2 2.8
Source: Company, BOBCAPS Research
DuPont Analysis
Y/E Mar (%) FY16 FY17 FY18E FY19E FY20E
Tax burden (Net income/PBT) 65.9 65.9 66.0 66.0 66.0
Interest burden (PBT/EBIT) 102.9 101.4 107.2 106.3 105.5
EBIT margin (EBIT/Revenue) 22.8 23.1 22.6 22.3 21.9
Asset turnover (Sales/Avg. total
117.1 106.2 105.6 104.6 115.5
asset)
Leverage (Avg. total asset/Avg.
136.9 125.9 121.6 121.2 123.2
equity)
ROE 24.8 20.6 20.5 19.8 21.7
Source: Company, BOBCAPS Research
Ratio Analysis
Y/E Mar FY16 FY17 FY18E FY19E FY20E
YoY growth (%)
Sales (2.1) (2.8) 10.6 13.7 28.1
EBITDA 30.4 (1.1) 9.6 12.0 27.2
EPS 23.0 (3.3) 14.7 11.1 25.3
Profitability & Return ratios (%)
EBITDA margin 26.1 26.5 26.3 25.9 25.7
EBIT margin 22.8 23.1 22.6 22.3 21.9
Adjusted profit margin 15.5 15.4 16.0 15.6 15.3
Adjusted ROAE 24.8 20.6 20.5 19.8 21.7
ROCE 21.6 19.3 18.7 18.4 20.4
Working capital days
Receivables (days) 70 74 72 70 69
Inventory (days) 80 103 95 91 86
Payables (days) 45 43 43 42 43
Ratios (x)
Gross asset turnover 2.7 2.5 2.3 1.9 2.0
Current ratio 1.2 1.1 1.1 1.0 1.2
Net interest coverage ratio 44.3 41.0 191.1 187.3 378.4
Adjusted debt/equity (0.3) (0.3) (0.3) (0.2) (0.3)
Source: Company, BOBCAPS Research
Disclaimer
Recommendation and Absolute returns (%) over 12 months
BUY. We expect the stock to deliver greater than 15% absolute returns.
HOLD. We expect the stock to deliver between -5% and 15% absolute returns.
SELL. We expect the stock to deliver less than -5% absolute returns.
Not Rated (NR). We have no investment opinion on the stock.
As of 24 August 2017, out of 58 rated stocks in the BOB Capital Markets coverage universe, 42 have BUY ratings, 10 are rated HOLD and 6 are rated SELL. None of
these companies have been investment banking clients in the last 12 months.
Analyst Certification
I, Arun Baid, MBA (Finance), Research Analyst, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the
specific recommendation(s) or view(s) in this report. Analysts are not registered as research analysts by FINRA and are not associated persons of BOBCAPS.
currencies, affectively assume currency risk. In addition, options involve risks and are not suitable for all investors. Please ensure that you have read and understood the
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BOBCAPS or its research analyst or his/her relatives do not have actual/beneficial ownership of one per cent or more securities in the subject company at the end of the
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BOBCAPS or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from
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It is confirmed that Arun Baid, MBA (Finance), Research Analyst of this report, has not received any compensation from the companies mentioned in the report in the
preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
It is confirmed that Arun Baid, MBA (Finance), Research Analyst, does not serve as an officer, director or employee of the companies mentioned in the report.