Vous êtes sur la page 1sur 50

Initiating Coverage

INDIA l Institutional Research l Consumer l July 29, 2019

Mayur Uniquoters l BUY l TP: 360


Playing in its own league, all set for a higher growth trajectory
Mayur Uniquoters (Mayur), the largest player in the Indian synthetic leather market, Target Price Rs 360 Key Data
is currently undergoing an interesting phase wherein it is set to foray into the PU Bloomberg Code MUNI IN

(Polyurethane) synthetic leather business and commence dealings with many CMP* Rs 256 Curr Shares O/S (mn) 45.3
Diluted Shares O/S(mn) 45.3
European auto OEMs. The company has been on a slow growth path due to its focus
on high margin businesses, intensifying competition and slowdown in the business Upside 41% Mkt Cap (Rsbn/USDmn) 11.6/168.4
Price Performance (%)* 52 Wk H / L (Rs) 435/234
of its few focused clients. However, with commencement of PU business & supplies
1M 6M 1Yr 5 Year H / L (Rs) 570/234
to Mercedes and recovery in its auto and footwear segments, Mayur would be again MUNI IN
(4.3) (31.0) (38.1) Daily Vol. (3M Avg.) 16,065
on a double digit growth path. Recently, they have become one of the proud NIFTY (4.8) 4.7 1.0
suppliers for Daimler (parent company of Mercedes), a great achievement for any *as on 26 July 2019; Source: Bloomberg, MNCL Research
Indian company. Strong business fundamentals such as diversified clientele and
Shareholding pattern (%)*
strong product portfolio along with high return ratios, strong net cash position and
Jun-19 Mar-19 Dec-18 Sep-18
consistent pay-outs to shareholders by way of dividends/buybacks make Mayur a
Promoter 61.3 61.3 61.3 61.3
compelling investment proposition. We expect the company to deliver a strong
FIIs 15.1 15.5 16.0 16.0
Revenue/EBITDA/PAT CAGR of 14%/13%/10% during FY19-FY22E and hence, initiate
DIIs 5.4 5.3 4.4 5.4
coverage on Mayur Uniquoters with a BUY and a target price of Rs 360 (17x FY21E
Others 18.2 18.6 18.3 17.3
EPS/14x FY22E EPS).
Source: BSE, *as on 26 July 2019
 Foray in PU business - a multi-year high growth opportunity: The Indian PU
leather market is currently dominated by Chinese imports and presents Rs35bn MNCL vs. Bloomberg Consensus*
opportunity. Considering this big opportunity, Mayur had been planning to foray Particulars FY20E FY21E
(Rsmn)
into this business for long, and finally they are going to start their PU operations MNCL BBG Var (%) MNCL BBG Var (%)

in Q2FY20. Given Mayur’s strong relationship with OEMs and superior quality & Sales 6,192 6,366 (2.7) 7,114 7,691 (7.5)

services, we believe that the company is all set to replace Chinese imports. In EBITDA 1,346 1,380 (2.5) 1,487 1,673 (11.1)

the first phase, with a capex of Rs1.2bn the capacity of 1 mn meter/month, PAT 875 916 (4.5) 942 1,092 (13.7)

Mayur can reach ~Rs2bn sales from the PU business in three years. In the long- *as on 26 July 2019 Source: Bloomberg, MNCL Research Estimates
run, this expansion has a potential to generate return ratios similar to Mayur’s Best margin profile amongst domestic peers
domestic business and opens doors for a multi-year high growth opportunity.
 High margin export business to grow well with Mercedes on board: Mayur
maintains very high standards for manufacturing facilities & product quality and is
the only Indian leather manufacturer who supplies to US OEMs such as Ford and
Chrysler. Further, after years of concerted efforts, they have now become an
approved vendor for Daimler (parent company of Mercedes) and are in talks with
several other European OEMs. All this would put the company’s high margin
export business (~17% of sales/~30% of operating profit) with OEMs on double
digit growth path and aid the margin levels. Source: MNCL Research

 A plant in south to negate the intensifying competition: To offset the effects of Mayur trading at a discount
intensifying competition in the south Indian footwear market, Mayur has been
trying to set up a plant in south market. They had earlier selected Mysore for the
plant set up but due to land issues, now they are finalizing Anantapur in Andhra
Pradesh which is strategically located. This step will not only help the company
regain the lost business in southern India and grow it better, but also it will aid in
ramping up business with south based auto players.
 Trading at moderate valuations: Mayur has corrected by ~50% during the last 18
months due to tepid earnings and delay in PU business set up & Daimler approval.
With PU capacity coming on stream in a few months, commencement of Mercedes
business in FY20 and recovery in the footwear & auto segments in medium term, Source: MNCL Research
we estimate double digit earnings growth in coming years. Considering high return
Awanish Chandra
ratios, strong cash position and consistent handsome pay-outs to shareholders, awanish.chandra@mnclgroup.com; 91 22 4445 1091
we value Mayur at 17x its FY21E earnings to arrive at a TP of Rs 360, factoring in Anubhav Rawat
14%/10% CAGR in revenue/earnings over FY19-22E and recommend a BUY. anubhav.rawat@mnclgroup.com; 91 22 4445 1092

Y/E Mar (Rs mn) Revenue YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%) Adj EPS RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)
FY17 4,767 (6.7) 1,274 26.7 821 (0.5) 17.8 22.4 21.6 22.4 13.4
FY18 5,522 15.8 1,451 26.3 941 14.6 20.6 22.3 22.0 20.7 12.2
FY19 5,734 3.8 1,275 22.2 872 (7.4) 19.2 17.9 17.5 13.2 7.5
FY20E 6,192 8.0 1,346 21.7 875 0.4 19.3 15.9 15.8 13.2 7.0
FY21E 7,114 14.9 1,487 20.9 942 7.6 20.8 15.5 15.5 12.2 6.3
FY22E 8,531 19.9 1,844 21.6 1,166 23.8 25.7 17.4 17.4 9.9 4.9
Source: Company, MNCL Research Estimates

MNCL Research is also available on Bloomberg and Thomson Reuters


Initiating Coverage MNCL Research is also available on Bloomberg and Thomson Reuters
Index
Investment Thesis in Charts ............................................................................................................... 3
Mayur – A standout player in artificial leather market ...................................................................... 4
A dominant player with focus on R&D and backward integration...................................................... 4
Only Indian player working with Auto OEMs in US and European regions ......................................... 5
OEM oriented business approach ....................................................................................................... 6
A complete focus on high margin business ......................................................................................... 7
Mayur stands tall in global synthetic leather market ......................................................................... 9
Synthetic leather gaining ground with wide range of applications ..................................................... 9
Global synthetic leather market presents a big opportunity ............................................................ 10
Mayur, a distinguished player amongst international peers ............................................................ 11
Indian synthetic leather market– Mayur is the strongest player ...................................................... 15
PVC artificial leather market ............................................................................................................. 15
PU artificial leather market size ........................................................................................................ 15
GST – A boon for organised players .................................................................................................. 17
A glance at domestic synthetic leather players – Mayur is way ahead............................................. 18
Mayur’s PVC business is set for a steady growth ............................................................................. 20
Footwear industry –Shift to organised players to provide much needed boost ............................... 20
Mayur’s focus on big footwear clients will help in the long run ....................................................... 22
New PVC plant in southern India on the cards.................................................................................. 23
Automobile industry –Slowdown to subside in coming years .......................................................... 24
Furnishing and others ....................................................................................................................... 27
Foray into PU creates new growth opportunity ............................................................................... 28
Europe, along with US, to boost high margin export business ......................................................... 29
Ford and Chrysler .............................................................................................................................. 30
Daimler (Parent company of Mercedes) ........................................................................................... 30
Mayur maintains its robust margin profile ...................................................................................... 31
Mayur has a natural hedge... ............................................................................................................ 31
...but crude price influences margin ................................................................................................. 31
Financial Snapshot ........................................................................................................................... 33
Sales momentum to get higher traction ........................................................................................... 33
Margins to stabilize at current levels ................................................................................................ 34
Net profit to witness slower growth ................................................................................................. 34
Return ratios to stabilise at current levels ........................................................................................ 35
Working capital cycle ........................................................................................................................ 35
Strong cash position and almost debt free status to be maintained despite on-going capex ........... 36
Consistent dividend and full tax paying status – A strong positive for investors .............................. 37
Valuation and view .......................................................................................................................... 38
Key risks to our thesis ...................................................................................................................... 39
Delay in PU business start/ramp up .................................................................................................. 39
Firming of crude prices...................................................................................................................... 39
Delay in ramping up of Mercedes business ...................................................................................... 39
Corporate Governance .................................................................................................................... 40
Promoters’ Shareholding .................................................................................................................. 40
Board of Directors ............................................................................................................................. 41
Promoter compensation ................................................................................................................... 41
Independent directors and their compensation ............................................................................... 41
Contingent liabilities ......................................................................................................................... 42
Related party transactions ................................................................................................................ 42
Auditors ............................................................................................................................................. 42
CSR activities ..................................................................................................................................... 42
Company Background ...................................................................................................................... 43
Quarterly Financials, Operating Metrics and Key Performance Indicators ....................................... 46
Historical financials (Standalone) .................................................................................................... 47
Financials (Standalone).................................................................................................................... 48

Mayur Uniquoters 2
Initiating Coverage
Investment Thesis in Charts
Global Synthetic Leather Market - Global Synthetic Leather Market - Domestic PVC leather Industry -
2015 (~$21bn) 2021E (~$31bn) Value wise split

China, 26.0% China, 27.0% Others, 89%

India, 3.5%
India, 4.0%

APAC, 10.5%
Other Regions, 60.0%
Other Regions, 57.0% APAC, 12.0% Mayur Uniquoters, 11%

Best margin amongst Indian synthetic leather players


30.0

25.0 Mayur Uniquoters


20.0
%

15.0

10.0

5.0
26.5
19.9

20.1

26.7
11.5

26.3
8.6
7.6
5.5
7.0

8.7
7.5
5.7
5.9

8.9
7.9
7.5
8.8

7.6
7.5
8.7

9.0
7.0
6.8
0.0
FY14 FY15 FY16 FY17 FY18
Mayur Uniquoters Jasch Industries Fenoplast Natroyal Industries Polynova Industries*

9,000 23.4 25 Mayur's FY19 Revenue Split


8,000 19.9 20
7,000 Export OEM, 17%
14.9 15 Export General, 7%
6,000 15.8
10 Auto OEM, 11%
Rs mn

5,000 8.0
7.8
%

Others, 7%
4,767

4,000 5
3.8
3,000
0.9 0
2,000
8,531
5,063

5,522

5,734

6,192
4,696

7,114

-5
5,110

1,000 (6.7)
0 -10
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E Footwear, 36%

Sales Sales Growth (%) - RHS Auto Replacement, 23%

Cash rich company - Total Cash as a % of Networth* 36


45% 33
40% 30
40% Mayur's 5-year average
37% 41% 36% 35% 27
P/E Multiple (x)

35% TTM P/E = 23.3


24
43% Discount

35% Mayur's 10-year average


21
30% 30% 18 TTM P/E = 16.4
15
25% 26% 12 Mayur's TTM P/E = 13.3
9
20% 6 19% Discount
3
15% 14% 0
Jul-14
Jul-09

Jul-19
Apr-12

Jun-13
Nov-12

Apr-17
Nov-17
May-18
Feb-10

Mar-11
Aug-10

Dec-13

Feb-15

Mar-16
Aug-15

Sep-16

Dec-18
Oct-11

10%
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Source: Company, MNCL Research, *Polynova EBITDA margin only till FY17, **total cash includes liquid investments

Mayur Uniquoters 3
Initiating Coverage
Mayur – A standout player in artificial leather market
A dominant player with focus on R&D and backward integration
Our research on domestic and international players’ manufacturing capacities of synthetic leather
shows that Mayur Uniquoters is the largest player in the Indian synthetic leather market with
the capability to churn out 3.05mn metres/month artificial leather, whereas it is among the
leading players in the global space. The company has six coating lines (five Italian and one Chinese)
with capability of producing 1.4-2.0 metre width leather products with multiple coatings. The
sheer size with utmost focus on quality has helped the company in positioning itself as the
favoured supplier of OEMs in automobile, footwear and leather accessories segments.
Exhibit 1: State-of-the-art plants with backward integration
Plant Location Capacity Coating Printing Profile
(mn linear Lines Lines
metres/month)
Jaitpura, Jaipur Coating: 1.85 4 3  Established in 1994, this plant serves as the
primary producer of artificial leather for the
company. It houses the main R&D facility.
 Employees: 700+

Dhodsar, Jaipur Coating: 1.20 2 3  This plant houses the textile division where
Textile: 1.72 knitted fabric is produced, which is used as a
backing cloth for PVC Vinyl.
 37 knitting machines (15 Japanese , 20
German & 2 USA )
 Employees: 500+
Source: Company, MNCL Research

To keep a total control on the quality, the company has done backward integration. Mayur has a
textile division where knitted fabric is produced in order to be used as a backing cloth for PVC
Vinyl. With knitting machines of German built, this division is spread over 85,000 square feet. The
knitted fabric capacity is more than sufficient to meet the company’s knitted fabric requirement.
Mayur differentiates itself from its peers given its sharp focus on continuous R&D and top quality
end product. The company is committed to constant R&D, which is testified by Department of
Science & Industrial Research (DSIR) approved R&D lab facilities. Mayur’s R&D labs are capable of
producing prototype synthetic leather products with right colour, grain, gloss and feel. Testing,
which is of utmost importance, is done using state-of-the-art equipments (Xenon, Thermal
desorption, QUV, Environmental FOG, Seam fatigue, Seam strength, Tensile, Abrasion). All these
facilities help the company in developing high quality products as per client’s requirement.
Exhibit 2: R&D facilities

R&D Lab- Jaitpura R&D Lab- Dhodsar

Source: Company, MNCL Research

Mayur Uniquoters 4
Initiating Coverage
Only Indian player working with Auto OEMs in US and European
regions
Mayur’s Dhodsar plant is mostly dedicated for auto business as quality requirement is high. The
plant has necessary approvals for supplying synthetic leather to the US and European markets.
The company’s plant is already audited by foreign auto players such as Ford, Chrysler, GM and
Daimler. Mayur is an approved vendor for all these players. The company is in talks with several
other European auto players such as BMW and Volkswagen to get their positive nod. All this places
Mayur in a totally different league as the company is the sole Indian player who could
breakthrough all these global players.
With strong R&D, world class machineries and backward integrated fabric plant, Mayur will
maintain its brand name and dominance in the artificial leather market.
Besides focusing on global auto OEMS, the company exports leather for applications such as
furnishing and leather accessories. The company has presence in several countries and it
continues to put in concentrated efforts to enhance its export business.
Exhibit 3: Wide spread global customer base

Source: Company, MNCL Research

The company has strong presence in the US market. To increase its strength in the global arena,
the company has plans to open warehouses in China, Munich and South Africa.
Exhibit 4: Mayur’s global footprint

Munich, DE, Warehouse Planned


Detroit, MI, USA - Sales Office
China - Warehouse and Sales Office Planned
El Paso, TX, USA - Warehouse New Delhi, India – Sales Office
Jaipur, India – Head Office
Juarez, Mexico - Warehouse
Bengaluru, India – Sales Office

East London, RSA - Planned

Source: Company, MNCL Research

Mayur Uniquoters 5
Initiating Coverage
The company has been gaining good grounds in its export segment. Mayur’s intention of focussing
on high margin export OEMs is clearly evident from the export revenue share which has grown
from 10% in FY10 to 24% in FY19. This unique business strategy has helped the company in
garnering better blended margins as compared to its competitors.
Exhibit 5: Focus is on high margin export business
Revenue split - Domestic vs. Export
100
10 16
19 22 24 24
27 26 30 27
80

60
%

90 84
40 81 78 76 76
73 74 70 73

20

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Domestic Export
Source: Company, MNCL Research

OEM oriented business approach


As highlighted earlier, the company intends to do business in high margin products only. Hence,
they have been focusing on OEMs in the footwear and auto segments.
Exhibit 6: Well diversified domestic client base
Automotive

Footwear clients

Others

Source: Company, MNCL Research

Mayur is doing business with all the marquee names in the domestic auto and footwear segments.

Mayur Uniquoters 6
Initiating Coverage
In the international market, Mayur’s list of clients include, Ford, Chrysler, GM and Daimler.
Exhibit 7: Marquee international clients
Automotive

Footwear

Others

Source: Company, MNCL Research

None of the Indian players can boast of such elite clientele and it will not be an overstatement if
we say that Mayur is playing in its own league.

A complete focus on high margin business


Unlike peers, the management is always ready to sacrifice growth opportunities (led by lower
margin business) to continue with its high margin businesses by selling quality/premium products.
While most of the Indian players continue to compete on prices and put efforts on comparatively
easier to grab lower margin business, Mayur’s focus has always been on the lucrative export
markets, especially in developed economies and this is seen in the growth of export OEMs revenue
share from a meagre 3% in FY10 to 17% in FY19. The company has painstakingly invested a lot to
gain those businesses. Even in highly competitive footwear segment, they only want to do
business with OEMs who focus on quality, even at the expense of growth. The footwear revenue
share has shrunk from 56% in FY10 to 36% in FY19. Besides higher growth of other segments, focus
on margin and cash flow management were the reasons for this decline.
Exhibit 8: Mayur enriching its product portfolio as exports increase
Revenue Split - segment wise
100 6 5
10 8 8 7 6 7 6 7
90
80
38 38 36
70 49 46
53 56 54
60 56 59
%

50
18 21 23
40 12 14
11 9 9 8
30 13 9 6 7 9 11
7 7
9
20 7 22
12 19 20 19 20 17
10 16 14 18
3
7 4 3 3 5 6 7 8 7 7
-
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Export General Export OEM Auto OEM Auto Replacement Footwear Others

Source: Company, MNCL Research

Mayur Uniquoters 7
Initiating Coverage
On account of rich product mix and high scale of operations, Mayur Uniquoters has been
displaying high EBITDA margin which has averaged at ~23.9% during the period of FY14-18. EBITDA
margins of its domestic peers has remained below 12% over the same period.
Exhibit 9: Mayur has best in class margin amongst Indian synthetic leather players

30.0

25.0
Mayur Uniquoters

20.0
%

15.0

10.0

5.0
19.9

20.1

26.5

26.7
11.5

26.3
8.6
7.6
5.5
7.0

8.7
7.5
5.7
5.9

8.9
7.9
7.5
8.8

7.6
7.5
8.7

9.0
7.0
6.8
0.0
FY14 FY15 FY16 FY17 FY18
Mayur Uniquoters Jasch Industries Fenoplast Natroyal Industries Polynova Industries*

Source: Company, MNCL Research, ACE Equity, *Polynova EBITDA margin only till FY17

Mayur Uniquoters 8
Initiating Coverage
Mayur stands tall in global synthetic leather market
Synthetic leather gaining ground with wide range of applications
Synthetic/artificial leather, also known as bicast leather, is made of artificial materials like
polyurethane (PU), polyvinylchloride (PVC) and other bio-based materials, which are processed,
dried and heated to resemble natural leather. Over time, synthetic leather has become the
preferred choice in mass market products such as footwear, furniture, automotive, clothing,
accessories, etc. due to the development of its diverse colours and patterns.
Exhibit 10: Growth in the various application industries driving the synthetic leather industry

Automotive
Artificial leather is used in car interiors like seat covers, door trims, steering wheel covers, gear boot and knob covers,
roof lining, sun visors and hoods. Artificial leather’s high elasticity makes it extremely comfortable and its resistance to
extreme temperatures, water and stains makes it very durable.

Footwear
Artificial leather is widely used in the footwear industry because of the variety and high durability. PU leather is mainly
preferred in the footwear industry for products like shoe uppers, shoe lining and insoles. These products find
application in formal shoes, boots, sports shoes, sandals, slippers and high end women’s footwear.

Furnishing
With the advent of artificial leather, the furnishing industry has seen a revolution due to its cost effectiveness and wide
array of colours and textures. Synthetic leather is used in upholstery for sofas, chairs, cushion-covers, bean bags, etc.
for homes, offices, commercial establishments and hotels. It also finds usability in marine upholstery due to salt water
resistance.

Accessories and garments


Synthetic leather is also used in a wide range of products like purses, bags and briefcases, diary covers and stationery
items, garments, belts, wallets and sports items like gloves, pads, footballs, etc.

Source: Company, MNCL Research

Mayur Uniquoters 9
Initiating Coverage
Exhibit 11: Global synthetic leather industry – usage wise split

Footwear, 38%

Others, 18%

Furnishing, 23%

Automotive, 21%

Source: Industry, MNCL Research

Increasing consumption of artificial leather in all these segments will drive the growth of the
synthetic leather industry. Besides, the artificial leather finished products continue to garner more
attention and are replacing natural leather owing to the following reasons:
 Cost effective: Synthetic leather is ~5x cheaper than natural leather.
 Durability: Along with maintaining natural leather like finish, it has properties like better
longevity, strength, is resistant to temperature variation and avoids unnecessary animal
slaughter.
 Technological advancement: Over the past few decades, the technology behind synthetic
leather manufacturing has improved by leaps and bounds, making synthetic leather almost
indistinguishable from natural leather in terms of look and feel. This has fuelled the growth of
the industry and the acceptance of synthetic leather products is on the rise.

Global synthetic leather market presents a big opportunity


The global synthetic leather market stood at $21.4bn in 2015 and is expected grow at a CAGR of
6.2% to reach $30.7bn in 2021.
Exhibit 12: Global synthetic leather sales volume and realisation
25,000 105
100
100
20,000
95
95
15,000
mn metres

Rs/metre

90
10,000
85 85
21,500

5,000
11,500

15,800

80

- 75
2010 2015 2021E

Global Annual Sales Volume (LHS) Average Price (RHS)

Source: Industry, MNCL Research

Mayur Uniquoters 10
Initiating Coverage
Mayur, a distinguished player amongst international peers
With a capacity of 3.05 mn metres/month, Mayur is one of the largest global players in the
synthetic leather space.
Exhibit 13: International peer group
Capacity
Company About
(mn metres/ month)

 Anhui Anli Material Anhui Anli Material Technology Co., Ltd. was founded in 1994. The company 7.4
Technology Co., Ltd. mainly focuses on research and development of ecological functional
(China) polyurethane synthetic leather and polyurethane composite materials. It is
also one of the listed companies at China Shenzhen Stock Exchange. There are
40 production lines of dry and wet synthetic leather. The production and
marketing capacity reaches 88,500,000 metres of ecological functional
polyurethane synthetic leather D77and 70,000 tons of polyurethane resin
each year. The products are widely applied to areas including men’s and
women’s shoes, sports leisure shoes, children’s shoes, safety shoes, work
shoes, fashion shoes, sofa furniture, etc. The products are sold to various
places in China and are directly exported to more than 70 countries and
regions.

 Mayur Uniquoters Ltd Established in 1994 by S.K. Poddar, Mayur Uniquoters is the largest synthetic 3.05
(India) leather player which uses the 'Release Paper Transfer Coating Technology' to
manufacture synthetic leather. It has two manufacturing facilities in Jaipur
with six coating lines. The company has a full range of machinery to fulfil
knitting, processing, heat setting, coating, embossing, printing, lacquering,
sueding, tumbling and laminating needs. Focused on R&D and innovation,
company’s Physical, Chemical and Product Development Laboratories are
capable of testing properties of artificial leather for different segments and
applications.

 Wuxi Double Elephant Wuxi Double Elephant Micro Fibre Material Co., Ltd., which is one of the PVC Capacity: 2.08
Micro Fibre Material Co. leading enterprises in Chinese artificial leather & synthetic leather industry. PU Capacity: 1.17
Ltd. (China) Its products are widely used in medium-to-high grade shoes, furniture, bags
& cases, sports apparatus like balls and gloves, garment, waist belt,
automotive upholstery and decoration fields, etc. Its products are sold abroad
in over fifty countries and regions such as America, Germany, Italy, Japan,
Russia, Korea, India and Australia, etc.

 Kuraray Co., Ltd. (Japan) Since its establishment in 1926, Kuraray Co., Ltd. has been a leader in the 1.3
synthetic fibre industry in Japan. CLARINO, a division of Kuraray Co., Ltd. is a
global leader in the manufacture of non-woven microfiber material, and
continues to be the leading innovator in the production of synthetic leather.
CLARINO materials have a wide variety of applications that include athletic
and casual footwear, apparel, sports balls and gloves, furniture, and
automotive interiors.

 Zhejiang Hexin Industry Zhejiang Hexin Industry Group Co., Ltd is one of the leading manufacturers of 1.3
group Co., Ltd (China) PU leather. The company is engaged in manufacturing a variety of wet and
dry process PU leathers. These products are widely used in garments,
footwear, furniture, balls and handbags making industries. The company
possesses 16 wet and dry-process production lines. Along with famous Japan
Kuraray Kabushiki Kaisha, the company has made investment to form Hexin
Kuraray Micro Fiber Leather (Jiaxing) Co., Ltd. which focuses on micro fiber
leather.

Mayur Uniquoters 11
Initiating Coverage
 Shadong Tongda Island Tongda is one of the largest microfiber companies in China's microfiber 1.3
New Material Co., Ltd industry. The leather is used for goods like leisure shoes, labour shoes,
(China) sandbeach sandal, sport shoes, shoe lining, working glove, sport glove, all
kinds of bags and cases, garments, sofa and furnishing.

 Daewon Chemicals (South Daewon Chemical was established in 1974 and has grown to become the PU Capacity: 0.9
Korea) leader of manufacturers of Polyurethane synthetic leather in Korea. The
company is well known for its wet type PU items used in shoes & balls.
Daewon has diversified into Micro Fiber coagulated material and household
wallpapers.

 Huafon Microfibre Huafon Microfibre (Shanghai) Co., Ltd. was established in 2002. The company 0.75
Shanghai Co. Ltd. (China) is mainly involved in the development, manufacture and marketing of
microfibre leather and has technical strength in the R&D and production of
PU resin, bundle superfine fibre, non-woven fabric, coagulation, coating and
dyeing.

 Zhejiang Yongfa Synthetic Yongfa Synthetic Leather was established in China in 1997. The company
Leather Co., Ltd (China) offers a large selection of PU and PVC leather in various thickness, norms, and
colour to make apparel, shoes and hats, bags and cases, hand bags, toys,
stationary, furniture, sports article and auto interiors. It has 7 wet lines of PU
synthetic leather, 2 lines of PVC leather, and a variety of sets of further -
processing equipments.

 San Fang Chemical Established in 1973, San Fang is a Taiwan-based company principally engaged
Industry Co. Ltd (Taiwan) in the R&D, manufacture and sales of wet synthetic leather, ultrafine artificial
leather, dry and environmental friendly synthetic leather and other film
materials. Its products are applied in footwear materials, furniture, balls,
automotive materials, covering materials for electronic products, medical -
materials and construction materials, among others. The company operates
businesses in Taiwan, China, Hong Kong and Southeast Asia.

 Nan Ya Plastics Nan Ya Plastics is a Taiwan-based company principally engaged in the


Corporation (Taiwan) manufacture and sales of plastic products, electronic products & polyester
products and PU synthetic leather. The company is also engaged in
mechanical and electrical engineering businesses.
-

 Achilles Corporation The company was formerly known as Kohkoku Chemical Industry and
(Japan) changed its name to Achilles Corporation in February 1982. Achilles
Corporation was founded in 1947 and is headquartered in Tokyo, Japan.
Achilles Corporation manufactures and sells shoes, plastic products, synthetic
leather under the name of Super Cabron. Achilles exports its products to -
major nations across 6 continents.

 Zhejiang Meisheng Zhejiang Meisheng Industrial Co. Ltd. manufactures synthetic leather, suede
Industrial Co., Ltd (China) leather, suede fabrics, and other products. The products account for a large
market share in Fujian, Guangdong, Shanghai, Wenzhou and other coastal
cities. Most of the customers are the domestic famous brand enterprises.
-

Mayur Uniquoters 12
Initiating Coverage
 Benecke-Hornschuch The company is the specialist for surface materials and the associated
Surface Group (Germany) production technologies in the Continental Corporation. The Business Unit
offers polyamide - or rubber-coated foils, sheets and fabrics from a single
source. The products include surface materials for automotive interior trim,
-
surface materials for decorative & technical applications, printing blankets &
forms and assembled products. These materials are mainly installed in
airplanes, trains, RVs, and different industrial applications as well as on ships.

 CGT (Canada) Since 1869, CGT is one of the world's leading producers of coated fabrics and
films. The company is present in China, Japan, US, France and Germany. CGT
produces coated fabric for automotive interiors, vinyl liners for pools and
construction membranes for roofing and decking. -

 VulcaflexS.p.A (Italy) Originally the company was a producer of calendered synthetic leather, but
in the 1960s, Vulcaflex invested into the coated film sector in order to meet
new market demands. The company has four segments, namely, packaging
-
(food, pharmaceutical), automotive interiors, fashion (bags, shoes, apparels,
etc.) and industrial applications.

 Lederplast (Italy) Since 1973 Lederplast has been producing synthetic leather for use in
upholstery, marine, automotive and accessories & gadgets.
-

 Alfatex Italia SRL (Italy) Since 1989, the company has been producing laminated velvet and synthetic
leather for residential upholstery, hospitality, automotive, marine and leather
goods like shoes.
-

 Filwel Co. Ltd (Japan) Located in Japan, the company's Hofu plant is involved in manufacturing and
sales of artificial leather materials and Precision polishing pads.

Source: Company, MNCL Research

Exhibit 14: Mayur – Best amongst its international peers on financial parameters
5 Year CAGR % (FY13-18) EBITDA ROE ROCE
Company Name (FY18) D/E
Revenue EBITDA PAT Margin(%) (%) (%)
MayurUniquoters Ltd. 8.1 16.0 16.6 26.6 22.3 21.6 0.0
Anhui Anli Material Technology Co. Ltd 4.6 (24.0) (18.9) 1.1 3.6 3.1 43.2
Wuxi Double Elephant Micro Fibre Material Co. Ltd 17.8 (2.4) 1.0 3.1 2.6 4.2 22.1
Kuraray Co. Ltd 4.2 (9.2) (2.6) 10.9 6.0 4.8 39.0
Zhejiang Hexin Industry group Co., Ltd (2.8) N.A. 23.7 (73.7) (53.2) (47.1) 50.7
Daewon Chemicals Co Ltd 0.0 (1.3) N.A. 4.5 3.6 3.3 41.5
HuafonMicrofibre Shanghai Co. Ltd 30.4 15.9 24.1 12.1 5.9 5.3 17.1
Xingye Leather Technology Co. Ltd (1.9) (9.8) (10.3) 7.7 5.0 4.9 19.9
San Fang Chemical Industry Co. Ltd (2.7) (24.7) (20.3) 4.0 3.7 2.8 44.0
Nan Ya Plastics Corporation 0.4 13.6 14.7 8.8 14.4 11.3 26.9
Achilles Corporation 0.4 1.1 8.7 2.1 0.8 0.7 12.5
Source: Company, MNCL Research

Mayur Uniquoters 13
Initiating Coverage
India’s share in the global artificial leather market has been growing and is expected to touch 4%
and 5% in FY21E and FY27E respectively. This provides a big comfort, as it will aid the dominant
Indian players like Mayur to grow in the coming years.
Exhibit 15: Global synthetic leather market - geography wise split - India gaining ground
2010 2015
China, 22.5%
China, 26.0%

India, 2.5%

India, 3.5%

Other Regions,
Other Regions, APAC, 9.5% 60.0%
65.5% APAC, 10.5%

2021E 2027E

China, 27.0%
China, 28%

India, 4.0%
India, 5.0%

APAC, 12.0%
Other Regions, 57.0% Other Regions, 54.5% APAC, 12.5%

Source: Industry, MNCL Research

Mayur Uniquoters 14
Initiating Coverage
Indian synthetic leather market– Mayur is the
strongest player
India commands ~4% of the global synthetic leather market. Currently, in terms of domestic
production, Indian synthetic leather market has mostly PVC leather manufacturing whereas for
PU leather it is mostly dependent on imports from China. The consumption of synthetic leather in
India has been growing on account of growth in the underlying sectors such as auto, footwear,
furnishing, etc. The market is set to witness steady growth in coming years due to tightening of
regulatory environment, which offers a great opportunity for the organized players.
Exhibit 16: Indian synthetic leather market landscape
PVC vs PU - value wise split Indian PVC leather market - volume wise split

Export, 10%
PU, 47% Unorganised,
75%

PVC, 53%
Organised, 15%

Source: Industry, MNCL Research

PVC artificial leather market


As per estimates, the Indian PVC leather production is ~30mn metre per month, which translates
into Rs40bn annual size in value terms. In value terms, market is divided 50:50 between organised
and unorganised players. We estimate that the organised PVC volume accounts for ~15%, whereas
export of PVC leather is around ~10%. The major chunk of PVC volume i.e. ~75% is still
unorganized. Thus, on a ~8mn metre/month organised space, Mayur is the largest player with
3.05mn metre/month production capability.
In our estimate, the footwear application of PVC leather is around ~50% of the total 30mn
metre/month. In value terms, it is around ~44% of total PVC leather market of Rs40bn.

PU artificial leather market size


As per estimates, PU import into India is around ~20mn metre/month, which translates into
around ~Rs35bn opportunity.
In the domestic PVC leather market, Mayur commands ~11% and ~6% market share, value and
volume wise respectively. In the overall synthetic leather market, value and volume wise, the
company commands ~6% and ~4% market share respectively.

Mayur Uniquoters 15
Initiating Coverage
Exhibit 17: Domestic PVC leather Industry - Value wise split

Others, 89%

Mayur Uniquoters, 11%

Source: Company, MNCL Research

In Indian footwear market, application of PU is significant regardless of regions due to its better
durability, easier manufacturing process and scope for better design.

Exhibit 18: Indian footwear - material wise split


North India South India

Others, 5%
PVC, 15%
PU, 30%

PVC, 5%

EVA, 15%

PU, 60%

Hawaii, 30%

Hawaii, 40%

East India West India


Others, 5%
Others, 24% PU, 26%
PU, 45%
PVC, 15%

PVC, 7%

EVA, 6% Hawaii, 38% Hawaii, 35%

Source: Industry, MNCL Research

Given that Mayur is also foraying into PU leather business, it provides us comfort and thus, we
believe that Mayur is in the right direction of diversifying its product portfolio and future proofing
its growth trajectory.

Mayur Uniquoters 16
Initiating Coverage
GST – A boon for organised players
India witnessed the implementation of GST framework in 2017, which has paved the way for
better tax compliance. This step has created a perfect storm called input tax credit, which is slowly
leading to either complete shutdown of some unorganised businesses or the shifting of
unorganised businesses to an organised structure. The year of demonetisation and GST, i.e. FY17-
18, took a toll on Mayur’s revenue as public scrambled for cash and the industry wrestled to
understand GST, which in turn also impacted business of footwear segment (largely unorganized).
Having said that, we believe that the initial hiccups of demonetisation and GST are behind us, and
the future is secure and rather fortified for organised entities like Mayur.
Exhibit 19: Demonetisation affected Mayur’s FY17 top-line; GST helping organised players

Demonetisation hits economy With cash crunch behind, GST


and Mayur's revenue alike. starts aiding organised players.
7,000

6,000

5,000
Rs mn

4,000

3,000

2,000

4,767
4,696

5,063

5,110

5,734
5,522
1,000

0
FY14 FY15 FY16 FY17 FY18 FY19

Source: Company, MNCL Research

Mayur Uniquoters 17
Initiating Coverage
A glance at domestic synthetic leather players – Mayur is way ahead
Exhibit 20: Only a few large players in domestic synthetic leather market
Capacity
Company About
(mn metres/ month)

 Mayur Uniquoters Ltd Established in 1994 by S.K. Poddar, Mayur Uniquoters is the largest 3.05
synthetic leather player, which uses the 'Release Paper Transfer Coating
Technology' to manufacture synthetic leather. It has two manufacturing
facilities in Jaipur with six coating lines. The company has a full range of
machinery to fulfil knitting, processing, heat setting, coating,
embossing, printing, lacquering, sueding, tumbling and laminating
needs. Focused on R&D and innovation, company’s Physical, Chemical
and Product Development Laboratories are capable of testing
properties of artificial leather for different segments and applications.

 HR Polycoats Pvt. Ltd. Since 1995, the company has been doing in-house design, production, 1.4
manufacturing, quality control, inspection and after sales services of
artificial leather. The company has infrastructure for coating, non-
woven, embossing, printing, lacquering, sueding, tumbling and
laminating.

 Polynova Industries Ltd. Since 1988, Polynova, a part of Lupin Ltd, manufactures PU/PVC coated 1.2
fabrics & synthetic rubber coated products. Almost 60% of the
production is exported to developed countries like UK, France,
Germany, USA, etc.

 Natroyal Group Since 1962, Natroyal Group (formerly Samsons Group) are engaged in 1.1
manufacturing, exporting and leading suppliers of PVC vinyl flooring,
coated fabrics / leather cloth / artificial leather, two-wheeler seat cover,
circular & warp knitted fabrics and seating components. The production
facilities are located near Vadodara (Baroda), India and corporate office
is located in Mumbai, India. The products are exported to Europe, USA,
Russia, Middle East, Africa and South East Asia.

 Arora Vinyl Pvt. Ltd. Arora Vinyl is engaged in the manufacturing of synthetic leather, PVC 1.0
leather cloth, PU synthetic leather and PU coated leather, which are
used as a raw material for the manufacturing of footwear, furniture,
upholstery, seat covers and sports equipment. The company has a brand
named Aro-Vin. Arora Vinyl exports to UAE, Africa, Sri Lanka,
Bangladesh, etc., and sources raw material from USA, Korea, China,
Taiwan, Japan and Europe.

 Fenoplast Ltd. Incorporated in 1976, Fenoplast Limited is a leading manufacturer of 0.8


PVC leather cloth, PVC film and PVdC barrier films. Fenoplast supplies
faux leather to OEMs like TVS, Hyundai, Daimler, Volkswagen, Porsche
and BMW among others. It supplies rigid PVC and PVdC coated films as
packaging solutions for pharma and non-pharma applications.

 Colence International Private The company meets customer needs related to raw materials or 0.7
Limited finished goods related to footwear, furniture, car/motor/airline seat
covers and leather accessories such as handbags, wallets and belts. They
specialize in sourcing materials from India, Italy, South Korea and China.

Mayur Uniquoters 18
Initiating Coverage
 United Decoratives Pvt. Ltd. The company manufactures PU and PVC for footwear, furnishing, car 0.6-0.7
upholstery, leather goods and baggage industry.

 Jasch Industries Ltd. Jasch manufactures coated fabrics in collaboration with Duksung, Co, PVC: 0.70
South Korea. The main products manufactured are PU and PVC coated PU: 0.24
fabrics, PU Resin and radiation-based Nucleonic Gauges. The company
supplies coated fabrics to brands such as Bata, Liberty, Reebok, Puma,
Mahindra, Decathlan, Arvind Mill, etc. Jasch supplies its nucleonic
gauges to paper, steel, aluminium, plastics, textiles and other flat-web
products manufacturers like ArcelorMittal (Belgium & Kazakhstan), Isbir
Industries (Turkey), Kandil Steel (Egypt) and Mittal Steels (South Africa).

 Shakti Tex Coaters Pvt. Ltd. The company manufactures coated fabrics (PU/PVC) for use in ladies 0.5
handbags, upholstery, car seats and garments. They export PVC coated
fabrics and have clients in African and Gulf Countries. Shakti has
membership of Bombay Leather Cloth and Merchants Association.

 Nirmal Fibres Pvt. Ltd. The company recycles polyester/PET waste to manufacture Polyester 0.5
Staple Fibre (PSF). The company also produces Polypropylene Staple
Fibre (PPSF), Polypropylene (PP) spun bond non-woven fabric used for
packaging and artificial leather/PVC vinyl. It also trades coal for
industrial use and has links with BCCL & Coal India Limited.

Source: Company, MNCL Research

Exhibit 21: Mayur – Best amongst its domestic peers


5 Year CAGR % (FY13-FY18) EBITDA
Company Name (Based on FY18) ROE (%) ROCE (%) D/E
Revenue EBITDA PAT Margin (%)
MayurUniquoters Ltd. 8.1 16.0 16.6 26.6 22.3 21.6 0.0
Fenoplast Ltd. 6.6 -9.8 6.0 3.9 7.1 18.0 2.0
Jasch Industries Ltd. 11.4 9.0 18.8 8.4 9.9 14.3 0.3
Natroyal Industries Pvt Ltd. 2.2 4.3 -8.4 5.5 6.1 13.1 1.2
Polynova Industries Ltd.* 2.2 5.8 6.7 8.1 12.4 19.9 0.2
Source: Company, MNCL Research, ACE Equity, *Polynova Industries’ table values are ranging from FY12-17

Mayur Uniquoters is not only the largest player but also way ahead of its peers when it comes to
performance at the financial front. On both, operational as well as return ratios parameters, the
company has been reporting class apart numbers. All this is a result of a very clear vision of the
management to focus on high margin business, continued effort on R&D and a strong brand image
in the eyes of its big clients. The company has created this strong brand image by delivering best
quality products and services on time.

Mayur Uniquoters 19
Initiating Coverage
Mayur’s PVC business is set for a steady growth
The fortune of ongoing PVC business is largely dependent on footwear and auto markets. In
footwear segment, the company faced several challenges during the last 3-4 years, as the
competition from south based players got intensified. The company witnessed some recovery
during FY18 but faltered on growth towards the end of FY19 due to poor demand environment
and credit crunch. In the medium-to-long run, with growth in auto sector and recovery in the
footwear segment, the company is likely to witness good growth in the coming years.
Exhibit 22: Mayur’s FY19 revenue split

Export General, 7%
Export OEM, 17%

Others, 6%
Auto OEM, 11%

Footwear,
36%
Auto Replacement, 23%

Source: Industry, MNCL Research

Footwear industry –Shift to organised players to provide much needed


boost
India is the second largest global producer of footwear after China and world’s third largest
footwear consumer after China and the USA. The Indian footwear industry employs over 1.1
million workers and is amongst the top 10 footwear exporters.
The footwear production in India is over 22 billion pairs annually, which is approximately 9.6% of
the total global annual footwear output. Almost 90% of the footwear manufactured in India is sold
in the domestic market and the rest is exported.
The domestic footwear market is projected to grow at a CAGR of 15% to touch ~US$13bn by FY20,
up from ~US$7bn in FY16.

Exhibit 23: Synthetic leather – A dominating force behind the footwear industry
Footwear value wise split Indian footwear industry
14
Natural Leather, 12
20%
10

8
$ bn

6
Synthetic 4
Leather, 80%
12.6

2
5.5

7.2

0
FY14 FY16 FY20E
Source: Industry, MNCL Research

Mayur Uniquoters 20
Initiating Coverage
The footwear industry is dominated by the unorganized domestic footwear manufacturers,
nevertheless, the shift to organised market will be driven by:
 Higher penetration of brands in Tier-I and Tier-II cities
 Increase in disposable income of middle class
 Awareness of fitness and international brand amongst youth
 Urbanization and aspirational change in taste
 E-commerce

Going forward, as more organized players enter this sector, the competition will likely intensify.
The brick and mortar retail industry is also expected to witness intense competition from online
retailers because of the discounts they offer and the ease of shopping they provide.
In value terms, urban India accounts for ~67% of the footwear market with top 8 cities (Metro and
Mini-metro cities) contributing ~40% of the total urban footwear market. Further, Tier-I
contributes ~25%, whereas Tier-II and below cities contribute around ~35% of the overall urban
footwear market.
Exhibit 24: Rapid urbanisation and retail boom to propel footwear industry

City type wise break-up of Indian footwear market

Tier-I, 25%
Metro/Mini
Metro, 40%

Rural, 33% Urban, 67%

Tier-II, 19%
Rest, 16%

Source: Industry, MNCL Research

The branded footwear market is expected to grow at a CAGR of ~20% to account for ~50% of the
overall market by FY20E from current ~42% of total market. The Indian footwear market has
around ~26% organised players, which are estimated to reach ~29% by FY21 leading to a decline
in the unorganized share of ~74% to ~71% by FY21.
Exhibit 25: Segmentation of footwear market
Branded vs. unbranded Indian footwear market Organised vs. Unorganised
120
14
100
12
10 80
6.3 (~50%)
8 60 74 71
$ bn

6 40
4.2 (~58%)
4
6.3 (~50%) 20
2 26 29
3 (~42%)
0
0
FY18 FY21E
FY16 FY20E
Branded Unbranded Organised Unorganised
Source: Industry, MNCL Research

In the footwear market, the market share of branded products and organised players would
keep growing.

Mayur Uniquoters 21
Initiating Coverage
Mayur’s focus on big footwear clients will help in the long run
Considering the drivers of footwear industry and Mayur’s strong focus on organised players, we
believe that the positive growth trajectory of the branded footwear players and Mayur will move
in tandem. We are positive on the consumer and retail growth of India, and hence, are of the view
that footwear industry will move up from here.
Exhibit 26: Intensifying competition has hurt footwear segment sales of the company
Mayur's footwer segment sales
3,000

2,500

2,000
Rs mn

1,500

1,000

500
2,420

2,303
2,491

1,815

2,085

2,046

2,067

2,213

2,414
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Source: Company, MNCL Research

Payment issues and lack of quality product demand from the footwear players have led Mayur to
be more stringent in selecting its client base. The company keeps focusing on branded footwear
players like VKC, Paragon, Bata, Relaxo, etc., who produce footwear using quality synthetic leather
supplied by Mayur Uniquoters and the likes.
Exhibit 27: Focus on quality & high margin (low volume) business led to Mayur’s underperformance

70% Listed Footwear Players' sales growth vs Mayur's Footwear sales growth
60%
60%
50% 43%
40%
40%
30% 37%
21% 21% 20% 23%
20% 14% 14% 16% 15%
13%
10% 16% 0%
12% 2% 11% -2%
-3%
0%
-10%
-5%
-20%
-30% -21%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Footwear Industry Footwear Segment - Mayur


Source: Company, MNCL Research

Though this approach towards quality and focus on cash flow management has dented the
growth, the management is very clear in its approach and looks to pick only quality business with
better margins. A good growth in its focus clients will support the recovery in this business in
medium to long term.

Mayur Uniquoters 22
Initiating Coverage
New PVC plant in southern India on the cards
Mayur’s sluggish performance in the footwear segment was also led by intensifying competition.
The company lost some of its business to suppliers based in the south market. Mayur was not able
to mitigate the competition as its manufacturing plant is in Rajasthan, far from its key clients in
the South Indian market. To offset the competition, the company has been planning to set up a
plant in south market. Due to land issues, this plan got delayed and now the company is planning
to set up a new plant in Andhra Pradesh market.
We believe that the company will recover its lost businesses in the south Indian market with the
setting-up of the new plant. Moreover, it will help the company to grow its PVC leather business
in south India in a better way. This will save a lot of logistics cost and clients will not require to
keep higher inventory. All these factors combined will help the company to strengthen
relationships with the OEMs in south market.
As the plan to set up plant in Andhra Pradesh is in the initial stage, it should take around two years
and hence, these benefits will come in the medium-to-long run. This will help the company to get
their footwear business back on a better growth path. Also, this new plant will aid in ramping up
businesses from south based auto players such as TVS Motor.

Mayur Uniquoters 23
Initiating Coverage
Automobile industry –Slowdown to subside in coming years
Domestic automobile industry
Indian auto industry has seen a healthy growth with total production growing at a 10-year and 5-
year CAGR of 10.8% and 7.5% respectively. This growth has helped Mayur in growing its auto
segment which supplies synthetic leather for seats, doors trims, steering wheel covers, gear knob,
roof lining, etc.
Exhibit 28: A steady growth in Indian auto industry
5.0 40% 30.0 38%

4.0 30% 25.0


28% 28% 30%
28%
20.0
25%

mn units
3.0 20% 23%
mn units

15.0
16%
2.0 10% 10% 15%
14%
7% 10.0
4% 3% 4% 6% 10%

15.7
1.0 0% 0% 7% 6% 8%
5.0

18.8
6%
-4%

13.5

18.5
10.5

15.4

19.9
16.9

24.5
3.1

23.2
4.0
3.0

3.2

3.8
3.5
2.3

4.0
3.2
3.1

0.0 -10% 2% 2%
- 0%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Indian PV Production (LHS) Growth YoY (RHS) Indian 2W Production (LHS) Growth YoY (RHS)

1.2 45% 40.0 38%


36% 37%
1.0
30% 29% 30%
24% 30.0
0.8 20%
13% 26%
15% 23%
mn units

mn units

10%

24.0
23.4
0.6 20.0
21.5
20.6

3% 0% 15% 15%
-1%
0.4 13%
-10% 9%
-15% 10.0
0.2 6% 8%
-16% 5%
0.7
0.9
0.8

0.8

0.8

14.0
0.9
0.6

20.4
18.1

29.1
0.8

1.1
0.7

4%

30.9
1% 3% 25.3
- -30% 0.0 0%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Indian CV Production (LHS) Growth YoY (RHS)
Grand Total (LHS) Growth YoY (RHS)
Source: SIAM, MNCL Research

Replacement opportunities in domestic auto market


The artificial leather automotive products come in wide range of designs, colours and price range
and are far more superior to natural leather in terms of durability. To protect the original seat
covers, new car buyers get their seats covered by artificial leather covers, creating a big
replacement market. Besides, regular wear and tear of original artificial leather attachments in a
vehicle adds to the replacement market.
Exhibit 29: Synthetic leather comparison – OEM vs. Third party (3P) replacement
Auto Leather Interior OEM 3P Replacement
Quality High Low to Medium
Design Low to medium Medium-High
Pricing Medium Medium-High
Final decision by Auto manufacturers 3P Vendors
Source: Industry, MNCL Research

Mayur supplies to seat manufacturers of auto OEMs as well as replacement dealers.

Mayur Uniquoters 24
Initiating Coverage
Global automobile industry
On a global level, the automotive segment consumes ~21% of the total synthetic leather, and
hence, the fortune of artificial leather market is dependent on the global auto market growth.
Exhibit 30: Annual auto sales

20.0 16%
16.0 15%
14%
12%

17.3

17.2
16.0 12%

17.5
12% 10%

13.3
12.0

12.8
9%
6%

11.7
12.0 7% 8%
mn units

5%

mn units
6% 3%
8.0
5%
8.0 4% 1% 0%
-1%
-3% -1%
-1%
4.0
4.0 -1% -1% 0% -5%

12.1

12.9

14.5
14.6
12.8

14.7
17.6
13.1
12.1

14.7

16.7
15.6

-8% -9%
0.0 -4% 0.0 -10%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
US Auto Sales (LHS) Growth YoY (RHS) EU Auto Sales Growth YoY (RHS)
Source: Industry, MNCL Research

Mayur supplies to global seat manufacturers such as Lear, Magna and TS Tech.
Exhibit 31: Global auto seating market share
US automotive seating market share split Europe automotive seating market share split

Johnson Controls/Adient, 35% Johnson Controls/Adient, 37%

Lear, 24% Lear, 21%

Others, 10%

Faurecia, 3% Magna, 14%


Others, 21% Faurecia, 15%

TS Tech, 6% Toyota Boshoku, 8% Magna, 6%

China automotive seating market share split South East Asia automotive seating market share split

Johnson
Toyota Boshoku, 23%
Controls/Adient, Others, 44%
45%

Johnson
Lear, 8% Controls/Adient,
Dymos, 5% 14%
Others, 39% Faurecia, 4%

Toyota Boshoku, 4% TS Tech, 7% Lear, 7%

Source: Industry, MNCL Research

A recovery in the US auto market will lead to a better growth path for Mayur’s export business.

Mayur Uniquoters 25
Initiating Coverage
Over the last 5 years, Mayur’s revenue from auto OEM, auto replacement and export OEM have
grown at a CAGR of 14%, 26% and 2% respectively.
Exhibit 32: Mayur’s revenue – Auto segment
Auto OEM Auto Replacement
750 1,500

600 1,200

450 900
Rs mn

Rs mn
300 600

150 300

1,173

1,317
324

290

332

362

493

626

418

610

718

881
0 0
FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19

Export OEM Auto Revenue Split


3,500
1,200
3,000
1,000
2,500
Rs mn

1,173 1,317
800 2,000
881
Rs mn

610 718
600 1,500 418
362 493 626
290 332
1,000 324
400
500 869 1,000 959 1,060 1,080 959
200
1,000

1,060

1,080
869

959

959

-
FY14 FY15 FY16 FY17 FY18 FY19
0
FY14 FY15 FY16 FY17 FY18 FY19 Export OEMs Auto OEMs Auto replacement

Source: Company, MNCL Research

Auto OEM business is largely dependent on Tata Motors, Ashok Leyland and M&M, whereas auto
replacement business is driven by Maruti. Export OEM business is currently driven by Ford and
Chrysler and bringing Daimler on board will help in accelerating company’s growth.
With recovery in the auto sector both in domestic and international, auto segment sales will
continue its growth momentum.

Mayur Uniquoters 26
Initiating Coverage
Furnishing and others
Mayur works extensively to meet furnishing and fashion demands across the globe. The company
mainly exports to US, Sri Lanka, Mexico, South Africa, Middle East and other Gulf countries. The
company has displayed a CAGR of 8% and 13% in its general domestic and general export segments
respectively. Mayur is expected to register further growth in this segment as the demand for
better quality furnishing and apparels grows.
Exhibit 33: Mayur’s revenue – Furnishing and other segments

Domestic General Export General


500 500

400 400

300 300

Rs mn
Rs mn

200 200

100 100
258

320

329

281

298

385

219

320

363

368

394

401
0 0
FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19

Source: Company, MNCL Research

Exhibit 34: Mayur’s authorised distributor’s furnishing store

Source: Company, MNCL Research

Mayur Uniquoters 27
Initiating Coverage
Foray into PU creates new growth opportunity
PVC leather manufacturing has been the strength of India and Mayur has been leading the way.
However, for PU leather, India is totally dependent on Chinese supplies, as it is difficult to compete
on price with Chinese players in the PU leather business. After getting good success in the PVC
leather, Mayur is foraying into the PU leather business as Indian OEMs also prefer an organised
supplier like Mayur. OEMs are ready to support Mayur with better pricing, as it will provide them
comfort in terms of quality, services and timely supply. We believe that Mayur has all capabilities
to replace Chinese imports and get good traction on the PU front.
Exhibit 35: PU vs. PVC leather comparison
Particulars PU PVC
Pricing High Low
Quality High Medium
Imports High Low
Usage Out-Sole In-Sole
Customisation High Low
Unorganised Players Low High
Source: Industry, MNCL Research

Exhibit 36: PU plant to drive Mayur’s long term growth

Mayur plans to set-up a PU plant with a


capacity of 0.6 mn mtr/month in Rajasthan.
• FY2014 -2015
Permission to use recycled water of Reengus is
asked from the Rajasthan government.
Due to delay in commissioning of the PU plant,
the company approached other states for • FY2016 - 2017
setting up of PU plant.

Gwalior, MP finalised for the PU plant with 2 lines  FY2018


each having 0.5 mn mtr/month capacity.

PU plant set up in final stage. Production


• FY2019
to start by 2QFY20

Source: Company, MNCL Research

For Mayur, the PU project is progressing well in Gwalior, Madhya Pradesh and is expected to
commence its operations 2QFY20 onwards with an initial capacity of 0.5 mn metre/month. This
capacity is expected to double in FY22. Mayur has roped in a team of 5 to 6 Chinese professionals
for the commissioning of PU Plant. Considering Mayur’s strong relationship with footwear OEMs
and strong brand name, we believe the company will get good success in this new venture in
medium-to-long run. We believe that Mayur is set to generate ~Rs1.5bn sales from the PU
business by FY22E.
Exhibit 37: PU plant estimates
Particulars FY2020E FY2021E FY2022E
Capacity/month (square metres) 500,000 1,000,000 1,000,000
Estimated capacity utilization (%) 30 35 70
Estimated realization per meter (Rs) 180 180 180
Production = Sales (square metres) 1,800,000 4,200,000 8,400,000
Net Revenues (Rs mn) 324 756 1512
EBITDA (Rs mn) 27.24 72.72 274.3
EBITDA margin (%) 8.4 9.6 18.1
Source: MNCL Research

Mayur Uniquoters 28
Initiating Coverage
Europe, along with US, to boost high margin export
business
Mayur’s higher margin profile is well aided by its exports to US auto OEMs. This segment is tough
to crack as the foreign auto OEMs conduct a thorough inspection of artificial leather
manufacturing facilities and seek high level of manufacturing sophistication with no compromise
on the product quality.
During FY14-19, Mayur’s export revenue has grown at a CAGR of 2% with a slight dip in FY19 due
to global auto demand slowdown.
Exhibit 38: Mayur’s export OEM revenue

1,200

1,000

800
Rs mn

600

400

200
1,000

1,060

1,080

959
869

959

0
FY14 FY15 FY16 FY17 FY18 FY19

Source: Company, MNCL Research

The company’s export OEM segment is dependent on global auto industry growth, which has been
sluggish.
Exhibit 39: Recovery in global auto sales to create opportunities for Mayur

20.0 16% 16.0 15%


14%
12%
10%
17.3

16.0 12%
17.2
17.5

13.3

12% 12.0
12.8

9% 6%
11.7

12.0 7% 8% 5%
mn units

mn units

6% 8.0 3%
5% -1%
8.0 4% 1% -1% 0%
-3%
4.0
4.0 -1% -1% -1% 0% -5%
12.1

12.9

14.5
12.8

14.6
14.7
17.6
13.1
12.1

14.7

16.7
15.6

-8% -9%
0.0 -4% 0.0 -10%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
US Auto Sales (LHS) Growth YoY (RHS) EU Auto Sales Growth YoY (RHS)

Source: Industry, MNCL Research

Mayur mostly participates in new programs of Ford and Chrysler. Once it starts getting businesses
in existing models, the company’s growth will witness a higher trajectory. The management is
working hard to establish itself as a credible supplier to global auto companies and this will help
them in the long run.

Mayur Uniquoters 29
Initiating Coverage
Ford and Chrysler
The company has been successful in garnering the business of two major US auto OEMs viz. Ford
and Chrysler.
 ~25% of export OEM segment sales come from Ford USA. Mayur is currently working on their
new requests.
 ~75% of export OEM segment sales come from Chrysler meeting their 40-50% requirement.
Exhibit 40: US region annual sales
Chrysler Ford
0.40 3.00
0.34 2.50 2.49 2.46
0.32 2.50 2.40 2.38 2.38
0.33 0.31 0.30 0.31
2.06 2.16
2.00
mn units

0.26 0.24 1.75

mn units
1.68
0.22 1.44
0.20 0.19 1.50
0.19 0.18 0.17
1.00
0.12
0.50
0.05
0.00
-0.02

2014
2008

2009

2010

2011

2012

2013

2015

2016

2017

2018
2016
2008

2009

2010

2011

2012

2013

2014

2015

2017

2018

Source: Industry, MNCL Research

Daimler (Parent company of Mercedes)


Mayur had been trying and working hard for European auto clients to get onboard and now has
luxury brand Daimler under its belt. The company has spent Rs300mn on machinery upgradation
to meet Mercedes’ specifications. Mayur has opened an office in South Africa and business with
Mercedes will start in FY21.
Exhibit 41: Daimler’s production and wholesale

4.00

3.39
3.00
3.32
mn units

3.04
2.92
2.58

2.00
2.38
2.20
2.14
2.15

1.94
1.46

1.00
2.55

3.27
3.00
2.35

2.85

3.35
2.11

2.20
1.55
2.07

1.90

-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Production Total Wholesales


Source: Industry, MNCL Research

With Daimler in its portfolio, Mayur is now focusing on BMW and Volkswagen. It has already
procured embossing rolls worth Rs5-6mn. Till now, three trial rounds have been conducted and a
major audit is expected to be conducted soon.
Even though the global automobile sector is facing a slowdown, we believe that Mayur, being a
seasoned player in synthetic leather seating material with warehouse solution in USA/Mexico/RSA
for on time delivery, will continue to grow its export OEM business. The next leg of automobiles
growth, coming from model refreshes and new EVs, will help the company in expanding this high
margin business.
With addition of Daimler, we believe, FY21 onwards, the company’s export business will witness
strong growth.

Mayur Uniquoters 30
Initiating Coverage
Mayur maintains its robust margin profile
Exhibit 42: Synthetic leather coating process

Unwinding of release paper and skin coating Adhesive coating and fabric Release of synthetic leather and
lamination rewinding of release paper
Source: Colence’s website, MNCL Research

Exhibit 43: Mayur’s raw material break-up (%)


Particulars FY14 FY15 FY16 FY17 FY18 FY19
Chemicals 65.1 65.9 63.3 64.6 64.6 64.9
Fabric 27.1 27.3 29.0 27.8 27.8 27.7
Release Paper 5.4 4.1 4.9 5.0 5.0 4.8
Chemicals 2.4 2.7 2.7 2.7 2.7 2.6
Consumables and Packing Material
Source: Company, MNCL Research

Mayur has a natural hedge...


While prices of raw materials, PVC resin, plasticiser and synthetic yarn, are mainly crude driven,
the company has a natural foreign exchange hedge as it imports raw material and exports finished
synthetic leather to other countries.

Fabric ...but crude price influences margin


Over the years, Mayur has witnessed extreme crude price fluctuations, which has a negative
correlation with its gross margins. Benign crude prices have helped the company in displaying
robust margins.

Mayur Uniquoters 31
Initiating Coverage
Exhibit 44: Negative correlation between Mayur’s gross margin and crude price

140.0 50.0

120.0
40.0
100.0

$/barrel
80.0 30.0

% 60.0 20.0
40.0
10.0
20.0

0.0 0.0
Q1FY06

Q2FY07

Q3FY08

Q4FY09

Q1FY11

Q2FY12

Q3FY13

Q4FY14

Q1FY16

Q2FY17

Q3FY18

Q4FY19
Gross Margin (LHS) Crude Price (RHS)
Source: Company, MNCL Research

During FY16-18, the company had advantage of falling crude prices along with richer product mix.
This led to strong margin expansion. For few quarters, the company had witnessed margins in the
range of 29-30% and yearly margins stabilized around 26%. With crude prices inching up and poor
demand environment/intensifying competition hurting the ability of passing on higher RM costs,
margins got hit during FY19.
We believe that traction in the overall business and growing export business will aid margins but
commencement of the PU plant will keep the blended margin under check in coming years.
Exhibit 45: Margin to stabilise at current levels
2,000 30
1,800
26.5 26.7 25
1,600 26.3
21.7 21.6
1,400 19.9 20.1 22.2 20
20.9
Rs mn

1,200

%
1,000 15
800
10
600
400
5
1,844
1,346
1,451

1,487
1,018

1,354

1,275
1,274

200
932

0 0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

EBITDA (LHS) EBITDA Margin (RHS)


Source: Company, MNCL Research

Mayur Uniquoters 32
Initiating Coverage
Financial Snapshot
Sales momentum to get higher traction
We expect Mayur Uniquoters’ revenues to increase at a CAGR of 14% over FY19-22E. The
company’s sales growth has remained muted for the last five years as volume growth remained
subdued while overall realisation has also come down due to intensifying competition especially
in the footwear segment. Further, setting up of the PU manufacturing plant has also been delayed.
We expect the recovery in the auto sector, increased footwear demand, higher traction in exports
and foray into the PU business to support Mayur’s top-line growth in the coming years.
Exhibit 46: Mayur’s volume (PVC+PU) trend

45.0 25%

40.0
20% 20%
35.0 19%

30.0 15%
14%
mn metres

13%
25.0
10%
20.0 9%
8%
15.0 5% 5%

10.0 3%
0%
5.0 -1%

34.5
24.3
23.2
21.3

30.5

41.4
28.3
27.4
23.9

0.0 -5%
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Volume (LHS) Growth (RHS)

Source: Company, MNCL Research Estimates

Exhibit 47: Mayur’s revenue trend


9,000 23.4 25
8,000 19.9 20
7,000
15.8 14.9 15
6,000
10
Rs mn

5,000
7.8 8.0
%
4,767

4,000 5
3.8
3,000
0.9 0
2,000
8,531

-5
5,063

5,522

5,734

6,192

7,114
4,696

5,110

1,000
(6.7)
0 -10
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Sales Sales Growth (%) - RHS

Source: Company, MNCL Research Estimates

Mayur Uniquoters 33
Initiating Coverage
Margins to stabilize at current levels
We expect Mayur’s EBITDA to grow at 13% CAGR over FY19-22E mostly on account of sales
growth, as we expect higher personnel cost and manufacturing cost due to the new PU plant to
keep the margin in the range of 21-22%. In the recent time, the margin got pushed up primarily
on account of robust gross margin expansion due to better product mix and falling crude price.
Top-line growth and higher exports will offset some of the negatives and we expect the margin to
stabilize at around ~21% from on-going business.
Exhibit 48: Mayur’s EBITDA trend and EBITDA margin performance
2,000 30
1,800
26.5 26.7 25
1,600 26.3
21.7 21.6
1,400 19.9 20.1 22.2 20
20.9
Rs mn

1,200

%
1,000 15
800
10
600
400
5

1,844
1,346
1,451

1,487
1,018

1,354

1,275
200 1,274
932

0 0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
EBITDA (LHS) EBITDA Margin (RHS)
Source: Company, MNCL Research Estimates

Net profit to witness slower growth


Despite higher depreciation and fixed cost pressure from new PU business, we expect Mayur’s
PAT to grow at a CAGR of 10% over FY19-22E. PAT margin is expected to be around ~14% in FY22E.
Exhibit 49: Mayur’s PAT growth trend and PAT margin performance
1,400 20
18
1,200
17.2 14.1 16
17.0
1,000 16.1 13.2
15.2 14
13.7 12
13.0
Rs mn

800
%

12.1 10
600 8
400 6
4
1,166

200
568

659

825

821

941

872

875

942

2
0 0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

PAT PAT Margin (%) - RHS


Source: Company, MNCL Research Estimates

Mayur Uniquoters 34
Initiating Coverage
Return ratios to stabilise at current levels
Due to subdued PAT growth, the company’s RoEs have come down in the recent past. We believe
that RoE and ROCE will stabilise at ~17% levels.
Exhibit 50: Return ratios to remain at 15%
45.0
40.6
40.0

35.0
34.5 29.7
30.0 26.5
%

25.0 22.4 22.3


25.5 24.5
20.0 17.9 17.4
21.6 22.0 15.9 15.5
15.0 17.5 17.4
15.8 15.5
10.0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

ROE ROCE

Source: Company, MNCL Research Estimates

Working capital cycle


Mayur’s cash conversion cycle increased to 101 days in FY19 from 53 days in FY14 as the export
business grew and company opened its own warehouse in the US market. Debtor days increased
as the company started exporting directly to global OEMs through its US-based subsidiary as
compared to its earlier arrangement of dealing through agents. Poor payments from unorganised
footwear players, especially in North India also led to rise in receivables. Creditor days declined as
the company started making bulk imports, along with making early payments to avail discounts.
We expect the cash conversion cycle to stabilise at the current levels.
Exhibit 51: Stable working capital cycle
120
100 101 102 101 101
97
100 91
99 85 85 85
80 69 88 88 76
No. of days

53 61
60 65 51 51 51
52 45 47
50
40
40 48 36

37 44
38 36 34 35 35
20 32

-
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Inventory Period Debtors Period


Creditors Period Cash Conversion Cycle
Source: Company, MNCL Research Estimates

Mayur Uniquoters 35
Initiating Coverage
Strong cash position and almost debt free status to be
maintained despite on-going capex
There was no major capex during FY16-18 as company’s PU plant set up got delayed. The company
is in the final stage of setting up the new PU plant. Besides, the company is planning to add one
more coating line in their existing plant, which according to our estimate will take Mayur’s total
annual capacity to 44.4 mn metres by FY21.
Exhibit 52: Installed Capacity

50.0 120.0

96.0 100.0
40.0 93.3
83.4 77.8
mn metre/annum

77.3 80.0
74.7
30.0 66.3 65.4
63.4 60.0

%
20.0
40.0

10.0
20.0
22.2

36.6

36.6

36.6

36.6

36.6

36.6

44.4

44.4
0.0 0.0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Installed Capacity Capacity Utilisation (RHS)

Source: Company, MNCL Research Estimates

The total estimated capex for these developments is ~Rs1.5bn. The company has already incurred
a capex of ~Rs400mn during FY19. We expect Mayur will incur another Rs1bn over FY20-21. The
company has strong cash position (including liquid investments) of ~Rs2bn and it generates
healthy operating cash flow. Hence, the company is set to maintain its strong cash position and
debt free status.
Exhibit 53: Gross Debt and Net Debt
1.0

0.5 0.4 0.4 0.3


0.1 0.2
0.2 0.1 0.0 0.0 0.0
0.0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
-0.5
(0.4)
Rs bn

(0.6)
-1.0

-1.5 (1.3)

-2.0 (1.8)
(1.9)
(2.1)
-2.5 (2.2)
(2.5)
-3.0
Gross Debt Net Debt

Source: Company, MNCL Research Estimates

Mayur Uniquoters 36
Initiating Coverage
Exhibit 54: Strong operating cash flow
1,200

1,000

800

Rs mn
600

400

107
200

1,001

1,022
73

549
489
514

533
343

653
183

784

859

833
478

937
400

350
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
OCF CAPEX
Source: Company, MNCL Research Estimates

Exhibit 55: Cash Rich Company -- Total Cash as a % of Networth*


Total Cash as a % of Networth*
45%
40% 41%
40%
37% 36% 35% 35%
35%

30% 30%

25% 26%

20%
14%
15%

10%
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Source: Company, MNCL Research Estimates, *total cash includes liquid investments

Consistent dividend and full tax paying status – A


strong positive for investors
Mayur looks quite good on both tax and dividend payout/share buy-back parameters. The
company has been paying dividend, doing buy-backs consistently and paying full taxes. We expect
the company will continue this trend, which is a big positive for the shareholders.
Exhibit 56: Consistent dividend and full tax paying status
35.0 40.0
36.2
33.4 33.8 33.7 33.8
34.0 35.0
33.8
33.0 30.0
32.1 32.2 33.0 31.1 31.1
32.0 32.7 25.0
21.3 32.0
%

31.0 20.0
20.7 19.5
30.0 16.9 15.0

29.0 29.3 10.0

28.0 5.0

27.0 0.0
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Tax Rate (LHS) Payout (RHS)*
Source: Company, MNCL Research Estimates, *including share buyback

Mayur Uniquoters 37
Initiating Coverage
Valuation and view
Mayur is trading at 43%/19% discount to its 5 year/10 year average TTM PE respectively. We
remain confident on the company’s strength considering following factors:
 Top quality products/services with strong clientele
 State-of-the-art manufacturing and R&D set up
 Focus on high margin export clients; Addition of Daimler as new client
 Foray into PU synthetic leather to aid future growth
 Plan to set up a plant in South India

Exhibit 57: Mayur is trading at a discount

36
33
30
27
24 Mayur's 5-year average TTM P/E = 23.3
P/E Multiple (x)

43% Discount
21
18 Mayur's 10-year average TTM P/E = 16.4
15
12 Mayur's TTM P/E = 13.3
9
19%
Discount
6
3
0
Jul-09

May-15

Jul-19
Jun-17

Jun-18
Apr-14

May-16
Aug-10
Feb-11

Mar-12

Mar-13
Aug-11

Sep-12

Nov-15

Dec-16

Dec-17
Jan-10

Oct-14

Jan-19
Oct-13

Source: Company, MNCL Research

We expect Mayur to report 14%/10% CAGR in revenue/earnings over FY19-22E. We assign 17x PE
multiple to FY21E earnings and arrive at a TP of Rs360 and recommend a BUY on the stock. Please
note that we have not taken the valuation of US subsidiary into account which currently generates
~Rs37mn net profit (as on FY18).

Exhibit 58: 1-year forward EV/EBITDA chart Exhibit 59: 1-year forward P/E chart

20 35
30
15 25
20
10 15
10
5 5
Jul-18
Jul-14

Jul-15

Jul-16

Jul-17

Jul-19
Nov-14

Nov-15

Nov-16

Nov-17

Nov-18
Mar-19
Mar-15

Mar-16

Mar-17

Mar-18

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19
Nov-14

Nov-15

Nov-16

Nov-17

Nov-18
Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

EV/EBITDA Mean P/E Mean


Mean + Std Dev Mean - Std Dev Mean + Std Dev Mean - Std Dev

Source: Bloomberg, MNCL Research Estimates Source: Bloomberg, MNCL Research Estimates

Mayur Uniquoters 38
Initiating Coverage
Key risks to our thesis
Delay in PU business start/ramp up
Due to various issues, the company’s PU plant got delayed and they are set to start the business
towards the end of Q2FY20. Any further delay in the start of the PU business or in case PU business
ramp up takes more-than-expected time, it will impact the future growth story of the company.

Firming of crude prices


Falling crude price was one of the reasons for Mayur’s margin expansion. In a conducive demand
environment, the company always passes on higher RM prices. But if crude price goes up in a poor
demand environment, it will impact the profitability of the company.

Delay in ramping up of Mercedes business


After years of hard effort, the company has finally become an approved vendor for Daimler and is
looking to supply synthetic leather materials from FY21 onwards. Any delay in the ramp up of this
business will impact the expected earnings in coming years.

Mayur Uniquoters 39
Initiating Coverage
Corporate Governance
We believe that sound corporate governance is necessary for enhancing the trust of shareholders
and other stakeholders. We have undertaken a detailed corporate governance study covering
broad aspects such as the composition of the board of directors, independent directors,
compensation paid to the promoter directors and independent directors, details of auditors and
their remuneration, nature and amount of contingent liabilities, related party transactions and
CSR expenditure.

Promoters’ Shareholding
Mayur Uniquoters is promoted by Mr Suresh Kumar Poddar, a veteran in the synthetic leather
business. The promoters currently hold ~61.3% of the equity capital. Mr Suresh Kumar Poddar
holds the highest equity capital (33.9%) in the company. The promoters’ holding has gradually
increased to 61.3% in FY18 from 61.1% at the end of FY16. The details of the shareholding and its
movement are indicated in the following table and chart:
Exhibit 60: Promoter Shareholding as on 30 June 2019
Particulars % Holding
Arun Kumar Bagaria 1.19
Dolly Bagaria 0.83
Kiran Poddar 1.27
Manav Poddar 15.74
Puja Poddar 1.56
Suresh Kumar Poddar 33.98
Suresh Kumar Poddar (HUF) 6.72
Total 61.28
Source: Company, MNCL Research

Exhibit 61: High promoter shareholding


65.0

62.0 61.12 61.19 61.27 61.28

59.0
%

56.0

53.0

50.0
FY16 FY17 FY18 FY19

Source: Company, MNCL Research

Mayur Uniquoters 40
Initiating Coverage
Board of Directors
In FY18, Mayur’s board consisted of 67% independent directors. The promoter directors have
extensive experience in the synthetic leather industry and are first generation entrepreneurs.
They are well-versed with the domestic and global synthetic leather markets. The details of the
Board composition are as follows:
Exhibit 62: Board composition
Particulars FY14 FY15 FY16 FY17 FY18
- Total Strength 7 7 7 7 6
- Promoter Group Directors 2 3 3 3 2
- Independent Directors 4 4 4 4 4
- % share of promoters 28.6 42.9 42.9 42.9 33.3
- % share of independent 57.1 57.1 57.1 57.1 66.7
Source: Company, MNCL Research

Promoter compensation
In FY18, the total promoter compensation was 1.9% of PBT, of which the compensation to the
Managing Director was 1.1% of PBT. Compensation of key management personnel has gone down
from 3.3% of PBT in FY14 to 1.9% of PBT in FY18.
Exhibit 63: Promoter compensation
Name (Rsmn) FY14 FY15 FY16 FY17 FY18 FY14-18 Total
Suresh Kumar Poddar 11.7 14.0 14.3 15.4 15.9 71
- % share of PBT 1.4 1.5 1.2 1.3 1.1 1.3
Manav Poddar 8.6 10.1 10.2 7.7 - 37
- % share of PBT 1.0 1.1 0.8 0.6 - 0.7
Arun Kumar Bagaria 7.6 9.2 9.3 10.1 11.3 47
- % share of PBT 0.90 0.98 0.76 0.83 0.81 0.85
Total 28 33 34 33 27 155
- % share of PBT 3.3 3.6 2.8 2.7 1.9 2.8
Source: Company, MNCL Research

Independent directors and their compensation


As of FY18, Mayur’s board consisted of four independent directors. The independent directors
were collectively paid Rs0.3mn in FY18 equivalent to 0.02% of PBT. The details of the same are as
follows:
Exhibit 64: Independent directors & their compensation
Name FY18 Compensation (Rsmn) As % to PBT (FY18)
Kanwarjit Singh* 0.07 0.01%
Ratan Kumar Roongta 0.15 0.01%
Tanuja Agarwal 0.02 0.00%
Shyam Agarwal 0.03 0.00%
* Ceased to be director in Jan 2018
Source: Company, MNCL Research

Mayur Uniquoters 41
Initiating Coverage
Contingent liabilities
Mayur’s contingent liabilities have gradually decreased to 0.4% of net worth in FY18 from 0.5% of
net worth in FY16. The details are as follows:
Exhibit 65: Contingent liability
Particulars (Rs mn) FY16 FY17 FY18
Taxation and Duty Related 16.0 15.5 16.7
Non-Taxation Related 0.8 0.8 0.8
Total 16.8 16.3 17.5
Net Worth 0.5 0.4 0.4
Source: Company, MNCL Research

Related party transactions


Mayur’s related party transactions mainly involve sale of goods, freight and balance receivables.
As transactions are mostly with the US subsidiary, hence there is nothing that raises an alarm. The
details are as follows:
Exhibit 66: Related party transactions
Nature of Transaction (Rs mn) FY16 FY17 FY18
Freight Recovered – Mayur Uniquoters Corp (USA) 28 65.6 59.9
Freight Recovered - Related Party 5 4 5
Mayur Uniquoters Corp (USA) - Sale of Goods 508 1,019 1,055
Related Personnel - Sale of Goods 124 107.6 115.0
Balance Receivable – Mayur Uniquoters Corp (USA) 309 478 472
Balance Receivable - Related Party 135 128 148
Investment in Subs – Mayur Uniquoters Corp (USA) 1 1 1
Source: Company, MNCL Research

Auditors
Mayur appointed Price Waterhouse CA LLP as their statutory auditor in FY18. The auditors in their
report for the financial year 2017-18 have given qualified opinion based on the fact that the
company has deployed manual control instead of automated control with respect to time booking
records (attendance) of worker. The management is of the view that they have complied with
Payment of Wages Act, 1936 and other applicable labour law.
Exhibit 67: Auditors (FY2018)
Auditor Name Type Auditor Fees - (Rs mn) As a % of PBT
Price Waterhouse CA LLP Statutory Auditor 3.36 0.24%
Source: Company, MNCL Research

CSR activities
Mayur has been actively involved in CSR activities for the betterment of society. The company
spent Rs5mn in FY17 and Rs17mn in FY18. The spending increased in FY18 and was 77.4% of the
prescribed budget. As per management, the balance amount was allocated for short term
projects. In addition to existing multi-year projects, Mayur aims to allocate its CSR budget to
construction of schools in remote rural backward areas of Jaipur and skill development of rural
youth.
Exhibit 68: CSR Activity Spend
Company Avg Net Profit (last 3 Yrs) Prescribed Expenditure Total Spends Spend as % of prescribed limit
FY17 768 20 5 25.6
FY18 862 22 17 77.4
Source: Company, MNCL Research

Mayur Uniquoters 42
Initiating Coverage
Company Background
Established in 1994 by Mr S.K. Poddar, Mayur Uniquoters is the largest synthetic leather player,
which uses the 'Release Paper Transfer Coating Technology' to manufacture synthetic leather. It
has two manufacturing facilities in Jaipur with an installed capacity of 3.05 mn meters/month
spread across six coating lines. The company has a full range of machinery to fulfil knitting,
processing, heat setting, coating, embossing, printing, lacquering, sueding, tumbling and
Coating Line laminating needs. Focused on R&D and innovation, company’s Physical, Chemical and Product
Development Laboratories are capable of testing properties of artificial leather for different
segments and applications.
With a focus on segments such as footwear (36% of revenues) and auto (51%), Mayur supplies
synthetic leather to both domestic and overseas clients, with exports contributing 24% to its
revenue. In the domestic market, the company’s clientele includes key footwear players (VKC
Printing Machine group, Paragon, Bata, Action, Liberty, Relaxo, etc.) and Auto OEMs (Honda, Maruti, M&M, Tata,
Eicher Motors, etc.), whereas on the export front, it supplies to marquee global names such as
Ford and Chrysler, while BMW, VW and Daimler are in the pipeline.
Mayur Uniquoters’ PVC products provide the look and feel of different varieties to daily objects.
The company differentiates itself from competition due to its capability to derive inspiration from
natural things and convert them into beautiful textures, colors and applications, which are globally
admired.
Embossing Machine
Exhibit 69: Mayur’s innovative synthetic leather samples

Inspection Machine

Circular Knitting
Machine

Source: Company, MNCL Research

Mayur Uniquoters Corp. (MUC) - a wholly owned subsidiary: Based out of Texas, USA, MUC’s
main activity is to supply goods to OEM customer in USA on just in time basis. MUC is not engaged
in any manufacturing activity except some job work processing which is based on customers’
requirements.

Exhibit 70: Mayur’s wholly owned subsidiary


Mayur Uniquoters Corp. (Rs mn) FY16 FY17 FY18
Net Sales 353 1,011 1,236
PAT 25 25 37
Total Assets 334 535 571
Total Liabilities 320 535 514
Source: Company, MNCL Research

Mayur Uniquoters 43
Initiating Coverage
Exhibit 71: Key management personnel
Name Designation Profile
Mr Suresh Kumar Poddar Chairman and Mr Suresh Kumar Poddar, B.Sc, founded Mayur Uniquoters Ltd. in
Managing Director 1994. Mr Poddar, with his vast experience of 34 years in the field of
PVC synthetic leather line has created an efficient organization and one
of the largest synthetic leather and PVC Vinyl players of India. He has
been the Chairman of the Board of Directors at Mayur Uniquoters Ltd.
since July 27, 2000. He is a Science Graduate.
Mr Arun Kumar Bagaria Executive Director Mr Bagaria has completed his MBA from University of Strathclyde
Graduate Business School, UK. In the year 2007, Mr Bagaria joined the
board of Mayur Uniquoters Limited as an Executive Director. He has
ten years of experience in trading business with exposure in all
commercial activities.
Mrs Tanuja Agarwal Independent & Non - Mrs Tanuja Agarwal is B.A. Hons. (Psychology) from St. Xavier's College,
Executive Director Mumbai. She is a Partner in Ratan Das Gupta & Co. and devoted to
social work. She has been past President of Inner Wheel Club, Jaipur
Main and Janhit Sansthan. She is also associated with Concerned
Citizen, an NGO associated with WHO for spreading AIDS awareness
through lectures among school teenagers. Member of S. M. S. Medical
College, Jaipur Anti-Ragging Committee, Animal Rights Commission
and CII-IWN (Indian Women Network) as coordinator for Health and
Wellbeing.
Mr Ratan Kumar Roongta Independent & Non - Mr Ratan Kumar Roongta is M.Com (Financial Management) and JAIIB
Executive Director (Junior Associate of Indian Institute of Banking and Finance) and has
successfully handled diverse and challenging assignments in State Bank
of Bikaner & Jaipur for over three decades at various levels.
He has also served on the board of various companies including State
Bank of Bikaner & Jaipur (SBBJ), Gujarat State Energy Generation
Limited (Nominee of IFCI Limited).
Mr Shyam Agrawal Independent & Non - Mr Shyam Agrawal is a Ph.D. (Law), LLM, LLB & FCS. A Practicing
Executive Director Company Secretary, having experience of more than 10 years, he has
held the posts of President and Vice-President of one of the most
prestigious Institutions of the nation, The Institute of Company
Secretaries of India (ICSI). He also holds to his credit the honour of
having held the position of International Secretary at the Company
Secretaries International Association (CSIA). He is on the Board of Astron
Paper & Board Mill Limited.
Mr Arvind Kumar Sharma Independent & Non- Mr Arvind Kumar Sharma has done B. Tech & MBA in 1971 and 1985
Executive Director respectively and has got a vast experience of over 40 years in various
companies like Braj Binani Group, Rajasthan State Industrial
Development & Investment Corporation Limited (RIICO Ltd), Gujarat
Vittal Innovation City Limited, and Neesa Leisure Limited, and was also
associated as Nominee Director on the Boards of Dabur (India) Limited,
Rajasthan Electronics Ltd, Magma Petro Pack Ltd , SBL (India) Limited
Bharat Fertilizers and Chemicals Limited and many more.He has also
worked as a Corporate affairs consultant in Indospace Developers Pvt,
Ltd., Havells India, Emami Agro Tech Limited etc.
Source: Company, MNCL Research

Mayur Uniquoters 44
Initiating Coverage
Exhibit 72: Mayur’s Key Milestones

1968:
Aged 22, Mr Suresh Kumar Poddar began his career as a commissioning agent

1979-80:
New plant of door pads for Maruti Suzuki

1976:
Acquired a premium artificial
leather company’s distributorship 2005:
Setting up of coating Line-II at Jaitpura and Quality Certification 9001:2000

1994:
Established Mayur Uniquoters Ltd
through financial support from
RIICO-Line-I at Jaitpura Plant set up
2008: 2011:
Setting up of coating Line-III at Jaitpura Set up coating Line-IV at Jaitpura and started supplying
to USA Market for OEM

2012:
Set up of Textile Unit at Dhodsar 2014:
Set up coating line-V at Dhodsar

2016:
TS Certification 16949:2009
2015:
Set up coating Line-VI at Dhodsar

2019:
Setting up of machinery in PU plant
and its construction progressed.

2018:
Gwalior, MP finalised for PU plant with 2 lines,
each having capacity of 0.5 mn metres/month

Source: Company, MNCL Research

Mayur Uniquoters 45
Initiating Coverage
Quarterly Financials, Operating Metrics and Key
Performance Indicators
Exhibit 73: Quarterly Financials
Y/E March (Rs mn) 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Net Sales 1,408 1,378 1,380 1,355 1,411 1,477 1,608 1,237
Raw Materials 793 839 823 786 812 945 1,008 751
Employee Costs 67 68 69 72 77 76 82 55
Other Expenditure 152 132 138 156 146 181 178 164
EBITDA 397 340 349 341 377 276 340 267
Depreciation 42 42 43 44 45 44 45 46
Interest 2 4 5 3 5 6 3 (4)
Other Income 32 47 27 50 68 68 47 46
PBT 384 340 328 345 395 294 340 272
Tax 128 115 111 103 139 94 122 74
Tax rate (%) 33.2 33.9 33.7 30.0 35.2 32.0 36.0 27.2
Reported PAT 257 225 218 242 256 200 218 198
Y-o-Y Growth (%)
Revenue 8.8 14.7 26.8 14.6 0.2 7.2 16.6 (8.7)
EBITDA 2.7 9.7 14.7 24.9 (5.1) (18.8) (2.7) (21.6)
PAT 4.1 6.5 20.7 32.3 (0.3) (11.0) 0.0 (18.1)
Q-o-Q Growth (%)
Revenue 19.1 (2.1) 0.1 (1.8) 4.1 4.7 8.9 (23.1)
EBITDA 45.2 (14.4) 2.8 (2.3) 10.4 (26.8) 23.2 (21.3)
PAT 40.6 (12.3) (3.4) 11.0 6.0 (21.8) 8.6 (9.0)
Margin (%)
EBITDA 28.2 24.7 25.3 25.2 26.7 18.7 21.1 21.6
PAT 18.2 16.3 15.8 17.8 18.1 13.6 13.5 16.0
Source: Company, MNCL Research

Exhibit 74: Key Assumptions


Particulars (Rs mn) FY17 FY18 FY19 FY20E FY21E FY22E
Total volume (mn Meter) 23.9 27.4 28.3 30.5 34.5 41.4
YoY Change (%) (1.3) 14.3 3.4 7.9 13.2 20.0
Net realization (Rs/Meter) 199 202 203 204 210 212
YoY Change (%) (3.5) 1.4 0.4 0.8 2.6 1.4

Domestic Revenues 3,339 4,049 4,374 4,804 5,562 6,798


Export Revenues 1,428 1,474 1,361 1,388 1,552 1,733
Total Revenues 4,767 5,522 5,734 6,192 7,114 8,531
YoY Change (%)
Domestic Revenues (9.4) 21.3 8.0 9.8 15.8 22.2
Export Revenues 8.0 3.2 (7.7) 2.0 11.8 11.6
Total Revenues (4.8) 15.8 3.8 8.0 14.9 19.9
Source: Company, MNCL Research Estimates

Mayur Uniquoters 46
Initiating Coverage
Historical financials (Standalone)
Exhibit 75: Income Statement Exhibit 77: Balance Sheet
Y/E March (Rs mn) FY13 FY14 FY15 FY16 FY17 Y/E March (Rs mn) FY13 FY14 FY15 FY16 FY17
Net Sales 3,805 4,696 5,063 5,110 4,767 SOURCES OF FUNDS
% growth 19.8 23.4 7.8 0.9 (6.7)
Capital 108 108 811 231 229
Raw Materials 2,749 3,165 3,260 2,917 2,715
Reserves & Surplus 1,076 1,503 2,016 3,173 3,691
% of sales 72.2 67.4 64.4 57.1 57.0
Personnel 123 184 243 284 264 Shareholders’ Funds 1,184 1,611 2,827 3,404 3,920
% of sales 3.2 3.9 4.8 5.6 5.5 Total Loan Funds 248 417 448 259 120
Manufacturing & Other Expense 243 415 543 555 513 Deferred tax liabilities 36 59 48 83 84
% of sales 6.4 8.8 10.7 10.9 10.8 Total Liabilities 1,467 2,087 3,323 3,745 4,124
EBITDA 690 932 1,018 1,354 1,274 Application of funds
EBITDA Margin (%) 18.1 19.9 20.1 26.5 26.7
Gross Block 806 1,298 1,825 1,345 1,448
Depreciation 52 70 119 161 167
Accumulated Dep. 260 321 435 0 167
EBIT 638 862 899 1,193 1,107
Interest Expense 24 43 26 34 14 Capital WIP 189 266 36 79 39
PBT From Operations 614 819 873 1,159 1,094 Net Fixed Assets 736 1,242 1,427 1,423 1,320
Other Income 27 17 59 58 114 Investments 137 98 758 987 1,241
PBT 641 837 933 1,217 1,208 Other non-current assets 19 -38 660 3 47
Tax-Total 206 269 274 392 387 Inventories 442 638 561 504 583
Effective Tax Rate (%) 32.1 32.1 29.3 32.2 32.0
Sundry Debtors 565 671 907 1,228 1,287
Reported PAT 436 568 659 825 821
Adjusted PAT 436 568 659 825 821 Cash & Bank Balances 107 134 266 141 203
Loans and Advances 148 220 101 10 14
Exhibit 76: Key Ratios Other current Assets - - 92 112 108
Total Current Asset 1,262 1,663 1,926 1,996 2,195
Y/E March FY13 FY14 FY15 FY16 FY17
Sundry Creditors 474 631 519 458 577
Growth ratios (%)
Other Current Liabilities 133 226 197 206 103
Net sales 19.8 23.4 7.8 0.9 (6.7)
Provisions 60 59 73 0 0
EBITDA 29.4 35.1 9.2 33.0 (5.9)
Total Current Liabilities 667 917 789 664 679
Adjusted Net Profit 30.6 30.4 16.0 25.2 (0.5)
Net Current Assets 595 746 1,138 1,332 1,516
Margin Ratio (%)
Total Assets 1,467 2,087 3,323 3,745 4,124
EBITDA Margin 18.1 19.9 20.1 26.5 26.7
EBIT Margin 18.0 19.3 19.5 24.9 26.0
PBT Margins 16.1 17.4 17.2 22.7 22.9 Exhibit 78: Cash Flow
PAT Margin 11.8 12.5 13.4 16.4 17.5 Y/E March (Rs mn) FY13 FY14 FY15 FY16 FY17
Return Ratio (%) Operating profit before WC changes 485 659 763 1,016 859
ROE 42.7 40.6 29.7 26.5 22.4 Net change in working capital (213) (170) (230) (363) (75)
ROCE 38.9 34.5 25.5 24.5 21.6
Cash flow from operating activities (a) 272 489 533 653 784
ROIC 45.5 37.9 34.0 30.5 30.2
Capital Expenditure (366) (514) (343) (183) (107)
Turnover Ratio days (days)
Free Cash Flow (94) (25) 190 470 677
Gross Block Turnover Ratio 5.2 4.5 3.2 3.2 3.4
Cash flow from investing activities (b) (359) (460) (943) (335) (263)
Inventory Period 42.4 49.6 40 36 45
Cash flow from financing activities (c) 77 1 530 (438) (460)
Debtors Period 54.2 52.2 65 88 99
Net change in cash (a+b+c) (10) 30 119 (120) 61
Creditors Period 44.8 48.4 37 32 44
Cash Conversion Cycle 51.8 53.3 69 91 100
Solvency Ratio (x)
Debt-equity 0.2 0.3 0.2 0.1 0.0
Net Debt-Equity 0.0 0.1 (0.1) (0.2) (0.3)
Gross Debt/EBITDA 0.4 0.4 0.4 0.2 0.1
Current ratio 1.9 1.8 2.4 3.0 3.2
Interest coverage ratio 26.2 20.1 34.6 35.1 80.4
Dividend
DPS (Rs.) 2.0 2.5 3.0 3.5 1.0
Dividend Yield (%) 0.8 1.0 1.2 1.4 0.4
Dividend Payout (%) 21.6 20.7 21.3 19.5 5.5
Per share (Rs)
Basic EPS (reported) 20.1 26.2 15.2 17.9 17.9
FDEPS (Adjusted) 9.4 12.3 14.2 17.8 17.8
CEPS 10.5 13.8 16.8 21.3 21.4
Book value 25.6 34.8 48.2 73.6 85.1
Valuation
P/E 9.2 11.1 26.9 23.5 22.4
P/BV 3.4 3.9 7.9 5.7 4.7
EV/EBITDA 5.8 7.0 17.0 13.9 13.4
EV/Sales 1.1 1.4 3.4 3.7 3.6
Source: Company, MNCL Research Estimates

Mayur Uniquoters 47
Initiating Coverage
Financials (Standalone)
Exhibit 79: Income Statement Exhibit 81: Balance Sheet
Y/E March (Rs mn) FY18 FY19 FY20E FY21E FY22E Y/E March (Rs mn) FY18 FY19 FY20E FY21E FY22E
Net Sales 5,522 5,734 6,192 7,114 8,531 SOURCES OF FUNDS
% growth 15.8 3.8 8.0 14.9 19.9
Capital 227 227 227 227 227
Raw Materials 3,240 3,516 3,712 4,240 5,065
Reserves & Surplus 4,308 5,003 5,550 6,110 6,840
% of sales 58.7 61.3 60.0 59.6 59.4
Personnel 277 290 343 404 474 Shareholders’ Funds 4,535 5,230 5,777 6,337 7,066
% of sales 5.0 5.0 5.5 5.7 5.6 Total Loan Funds 59 192 0 0 0
Manufacturing & Other Expense 555 653 791 983 1,148 Deferred tax liabilities 77 66 66 66 66
% of sales 10.0 11.4 12.8 13.8 13.5 Total Liabilities 4,670 5,488 5,843 6,403 7,133
EBITDA 1,451 1,275 1,346 1,487 1,844 Application of funds
EBITDA Margin (%) 26.3 22.2 21.7 20.9 21.6
Gross Block 1,658 1,762 2,668 2,804 3,154
Depreciation 171 180 221 246 268
Accumulated Dep. 337 517 739 985 1,253
EBIT 1,280 1,095 1,125 1,241 1,575
Interest Expense 14 8 12 - - Capital WIP 19 393 36 300 300
PBT From Operations 1,266 1,087 1,113 1,241 1,575 Net Fixed Assets 1,340 1,637 1,965 2,119 2,200
Other Income 132 215 210 182 187 Investments 1,563 1,938 1,938 1,938 1,938
PBT 1,398 1,301 1,323 1,423 1,762 Other non-current assets 27 95 43 50 60
Tax-Total 457 430 447 481 596 Inventories 714 954 865 994 1,192
Effective Tax Rate (%) 32.7 33.0 33.8 33.8 33.8
Sundry Debtors 1,329 1,198 1,442 1,657 1,987
Reported PAT 941 872 875 942 1,166
Adjusted PAT 941 872 875 942 1,166 Cash & Bank Balances 256 192 124 279 514
Loans and Advances 15 14 15 17 21
Exhibit 80: Key Ratios Other current Assets 102 219 237 272 326
Total Current Asset 2,416 2,578 2,682 3,218 4,040
Y/E March FY18 FY19 FY20E FY21E FY22E Sundry Creditors 580 567 577 682 818
Growth ratios (%) Other Current Liabilities 95 193 209 240 288
Net sales 15.8 3.8 8.0 14.9 19.9 Provisions 0 0 0 0 0
EBITDA 13.8 (12.1) 5.6 10.5 24.0 Total Current Liabilities 675 761 785 922 1,106
Adjusted Net Profit 14.6 (7.4) 0.4 7.6 23.8 Net Current Assets 1,741 1,817 1,897 2,296 2,934
Margin Ratio (%) Total Assets 4,670 5,488 5,843 6,403 7,133
EBITDA Margin 26.3 22.2 21.7 20.9 21.6
EBIT Margin 25.9 22.8 21.5 20.0 20.7 Exhibit 82: Cash Flow
PBT Margins 22.9 18.9 18.0 17.4 18.5
PAT Margin 17.3 15.2 14.1 13.2 13.7 Y/E March (Rs mn) FY18 FY19 FY20E FY21E FY22E

Return Ratio (%) Operating profit before WC changes 1,013 1,041 1,097 1,188 1,434
Net change in working capital (155) (140) (148) (244) (402)
ROE 22.3 17.9 15.9 15.5 17.4
Cash flow from operating activities (a) 859 833 1,001 937 1,022
ROCE 22.0 17.5 15.8 15.5 17.4
ROIC 33.4 24.9 20.7 21.0 24.2 Capital Expenditure (73) (478) (549) (400) (350)
Free Cash Flow 786 355 452 537 672
Turnover Ratio days (days)
Cash flow from investing activities (b) (299) (853) (549) (400) (350)
Gross Block Turnover Ratio 3.6 3.4 2.8 2.6 2.9
Cash flow from financing activities (c) (496) (44) (520) (382) (437)
Inventory Period 47 61 51 51 51
Net change in cash (a+b+c) 63 (64) (68) 155 236
Debtors Period 88 76 85 85 85
Creditors Period 38 36 34 35 35
Cash Conversion Cycle 97 101 102 101 101
Solvency Ratio (x)
Debt-equity 0.0 0.0 - - -
Net Debt-Equity (0.4) (0.4) (0.4) (0.3) (0.3)
Gross Debt/EBITDA 0.0 0.2 - - -
Current ratio 3.6 3.4 3.4 3.5 3.7
Interest coverage ratio 94.7 130.9 97.5 NM NM
Dividend
DPS (Rs.) 1.4 3.3 6.0 7.0 8.0
Dividend Yield (%) 0.6 1.3 2.4 2.8 3.1
Dividend Payout (%) 6.8 16.9 31.1 33.7 31.1
Per share (Rs)
Basic EPS (reported) 20.8 19.2 19.3 20.8 25.7
FDEPS (Adjusted) 20.6 19.2 19.3 20.8 25.7
CEPS 24.3 23.2 24.2 26.2 31.6
Book value 99.2 115.4 127.4 139.8 155.9
Valuation
P/E 20.7 13.2 13.2 12.2 9.9
P/BV 4.3 2.2 2.0 1.8 1.6
EV/EBITDA 12.2 7.5 7.0 6.3 4.9
EV/Sales 3.2 1.7 1.5 1.3 1.1
Source: Company, MNCL Research Estimates

Mayur Uniquoters 48
Initiating Coverage
Disclaimer: Monarch Networth Capital Limited (hereinafter MNCL), a publically listed company, is engaged in services of retail broking, credits, portfolio
management and marketing investment products including mutual funds, life & general insurance and as such prepares and shares research data and reports
periodically with clients, investors, stake holders and general public in compliance with Securities and Exchange Board of India Act, 1992, Securities And Exchange
Board Of India (Research Analysts) Regulations, 2014 and/or any other applicable directives, instructions or guidelines issued by the Regulators from time to time.

Research report is a written or electronic communication that includes research analysis, research recommendation or an opinion concerning securities or public
offer, providing a basis for investment decisions. The views expressed therein are based solely on information available publicly/internal data/other reliable sources
believed to be true. The information is provided merely as a complementary service and do not constitute an offer, solicitation for the purchase or sale of any
financial instruments, inducement, promise, guarantee, warranty, or as an official confirmation of any transactions or contract of any kind.

Research data and reports published/ emailed/ text messaged via Short Messaging Services, Online Messengers, WhatsAppetc/transmitted through mobile
application/s, including but not limited to FLIP™, Video Widget, telephony networks, print or electronic media and or those made available/uploaded on social
networking sites (e.g. Facebook, Twitter, LinkedIn etc) by MNCL or those recommendation or offers or opinions concerning securities or public offer which are
expressed as and during the course of “Public Appearance” are for informational purposes only. The reports are provided for assistance and are not intended to be
and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Though disseminated
to clients simultaneously, not all clients may receive the reports at the same time. MNCL will not treat recipients as clients by virtue of their receiving this report.

The reports include projections, forecasts and other predictive statements which represent MNCL’s assumptions and expectations in the light of currently available
information. These projections and forecasts are based on industry trends, circumstances and factors which involve risks, variables and uncertainties. The actual
performance of the companies represented in the report may vary from those projected. The projections and forecasts described in this reports should be evaluated
keeping in mind the fact that these-

 are based on estimates and assumptions


 are subject to significant uncertainties and contingencies
 will vary from actual results and such variations may increase over a period of time
 are not scientifically proven to guarantee certain intended results
 are not published as a warranty and do not carry any evidentiary value.
 are not based on certain generally accepted accounting principles
 are not to be relied on in contractual, legal or tax advice.

Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Reports
based on technical analysis is focused on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's fundamentals
and as such, may not match with a report on a company's fundamentals.

Though we review the research reports for any untrue statements of material facts or any false or misleading information, , we do not represent that it is accurate
or complete and it should not be relied on in connection with a commitment or contract whatsoever. Because of the possibility of human, technical or mechanical
error by our sources of transmission of Reports/Data, we do not guarantee the accuracy, adequacy, completeness or availability of any information and are not to
be held responsible for any errors or omissions or for the results obtained from the use of such information. MNCL and/or its Affiliates and its officers, directors
and employees including the analysts/authors shall not be in any way responsible for any indirect, special or consequential damages that may arise to any person
from any inadvertent error in the information contained in the reports nor do they take guarantee or assume liability for any omissions of the information contained
therein. Information contained therein cannot be the basis for any claim, demand or cause of action. These data, reports and information do not constitute scientific
publication and do not carry any evidentiary value whatsoever.

The reports are not for public distribution. Reproduction or dissemination, directly or indirectly, of research data and reports of MNCL in any form is prohibited
except with the written permission of MNCL. Persons into whose possession the reports may come are required to observe these restrictions. Opinions expressed
therein are our current opinion as of the date appearing on the report only. Data may be subject to update and correction without notice. While we endeavour to
update on a reasonable basis the information discussed in the reports, there may be regulatory, compliance, or other reasons that prevent us from doing so.

The reports do not take into account the particular investment objectives, financial situations, risk profile or needs of individual clients. The user assumes the entire
risk of any use made of this information. Each recipient of the reports should make such investigation as deemed necessary to arrive at an independent evaluation
of an investment in the securities of companies referred to in such reports (including the merits and risks involved).

Certain transactions - futures, options and other derivatives as well as non-investment grade securities - involve substantial risks and are not suitable for all
investors. Investors may lose his/her entire investment under certain market conditions. Before acting on any advice or recommendation in this material, investors
should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of investments referred to
in research reports and the income from them may fluctuate. Transaction costs may be significant in option strategies calling for multiple purchase and sales of
options. Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income
derived from the investment. Investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk.

The recommendations in the reports are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return
basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of
valuations/return/lack of clarity/event we may revisit rating at appropriate time. The stocks always carry the risk of being upgraded to buy or downgraded to a
hold, reduce or sell. The opinions expressed in the reports are subject to change but we have no obligation to tell our clients when our opinions or recommendations
change. The reports are non-inclusive and do not consider all the information that the recipients may consider material to investments. The reports are issued by
MNCL without any liability/undertaking/commitment on the part of itself or any of its entities.

Recipients of the research reports should assume that entities of MNCL may receive commission, brokerage, fees or other compensation from the company or
companies that are the subject of the reports. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance
of reports/data/material, may, from time to time have 'long' or 'short' positions in, act as principal in, and buy or sell the securities thereof of companies mentioned
therein or be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as market maker in the financial
instruments of the company/ies discussed therein or act as advisor or lender/borrower to such company/ies or have other potential conflicts of interests with
respect to any recommendation and related information and opinions.

Mayur Uniquoters 49
Initiating Coverage
We further undertake that-

 No disciplinary action has been taken against the research analyst or MNCL by any authority in connection with their respective business activity.
 MNCL, Research analysts, persons reporting to research analysts and their relatives may have financial interests and material conflict of interest in the subject
company.
 MNCL, Research analysts, persons reporting to research analysts and their relatives may have actual/beneficial ownership of 1% or more in the subject
company’s securities, at the month immediately preceding the date of publication of this research report.

Past performance is not a guide for future performance, future returns are not guaranteed and investors may suffer losses which may exceed their original capital.

The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in
this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries.
Distributing/taking/sending/dispatching/transmitting this document in certain foreign jurisdictions may be restricted by law, and persons into whose possession
this document comes should inform themselves about, and observe any such restrictions. Failure to comply with this restriction may constitute a violation of any
foreign jurisdiction laws.

The user should consult their own advisors to determine the merits and risks of investment and also read the Risk Disclosure Documents for Capital Markets and
Derivative Segments as prescribed by Securities and Exchange Board of India before investing in the Indian Markets.

Mayur Uniquoters
600
500
400
300
200
100
0
Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

Mayur Uniquoters Ltd

Source: Bloomberg, ACE Equity, MNCL Research

Analyst holding in stock: NO

Key to MNCL Investment Rankings

Buy: Upside by>15%, Accumulate: Upside by 5%to 15%, Hold: Downside/Upside by -5% to +5%, Reduce: Downside by 5% to 15%, Sell: Downside by>15%

Monarch Networth Capital Ltd. (www.mnclgroup.com)

Office: - 9th Floor, Atlanta Centre, Sonawala Lane, Opp. Udyog Bhavan, Goregaon (E), Mumbai 400 063. Tel No.: 022 30641600

Mayur Uniquoters 50
Initiating Coverage