Mayur Uniquoters Ltd

Result Update: Q1 FY 12

C.M.P: Target Price: Date:

Rs.351.00 Rs. 400.00 Sep 6th 2011

BUY
SYNOPSIS

Stock Data: Sector: Face Value Rs. 52 wk. High/Low (Rs.) Volume (2 wk. Avg.) BSE Code Market Cap (Rs.In mn) Textiles 10.00 467.00/227.00 1643 522249 1899.96

Mayur Uniquoters Limited engages in the manufacture and sale of PU, PVC, and PU-PVC synthetic leather products in India. During the quarter ended, the robust growth of revenue is increased by 29.00% Rs.695.77 million. Mayur Uniquoters Ltd has declared First Interim Dividend of Rs. 1.50/(i.e. 15%) per Equity Share of Rs. 10/- each.

Share Holding Pattern

1 Year Comparative Graph

The top line & bottom line of the company are expected to grow at a CAGR of 30% and 28% over 2010 to 2013E respectively. Company has been certified with ISO 9001:2008 (Quality Management System) which is demonstrative of their commitment towards continual improvement.

BSE SENSEX

Mayur Uniqootes

Years FY 11 FY 12E FY 13E

Net sales 2485.56 3032.38 3578.21

EBITDA 408.58 463.57 545.11

Net Profit 252.74 289.69 342.58

EPS 46.69 53.52 63.29

P/E 7.52 6.56 5.55

Peer Group Comparison

Name of the company Mayur Uniquoters Alok Industries APM Industries Sambandam Spinning CMP(Rs.) 351.00 18.95 12.25 78.00 Market Cap.(Rs.Mn.) 1899.96 14889.10 264.70 332.20 EPS(Rs.) 48.26 4.93 6.88 15.41 P/E(x) 7.27 3.84 1.78 5.06 P/Bv(x) 3.11 0.55 0.21 0.45 Dividend (%) 100.00 2.50 30.00 40.00

Investment Highlights

Q1 FY12 Results Update Mayur Uniquoters has disclosed phenomenal rise of net sales for the quarter ended June 30, 2011. During the quarter, the bottom line of the company surged by 16.22% and stood at Rs.61.04 million against Rs.52.52 million of the same period of the last year. The top line of the company for the quarter stood at Rs.695.77 million from Rs.539.36 million of the corresponding period of the previous year i.e. an increase of 29.00%. Total income has increased by 29.18% to Rs.700.49 million as compared to same quarter last year. The EPS of the company is stood at Rs.11.28 for the quarter ended June 30, 2011.

Quarterly Results - Standalone (Rs in mn)

As At Net sales PAT Basic EPS

Jun-11 695.77 61.04 11.28

Jun-10 539.36 52.52 9.70

%change 29.00 16.22 16.22

Break up of Expenditure

Declaration of dividend Mayur Uniquoters Ltd has declared First Interim Dividend of Rs. 1.50/- (i.e. 15%) per Equity Share of Rs. 10/- each of the Company and the Board also confirmed to initiate the necessary process for NSE listing.

Company Profile
Mayur Uniquoters Limited was established in 1992 by the present Chairman and MD, S K Poddar. It is a tech enterprise and has been a resounding success in the field of superior quality synthetic leather in India. Driven by a vision to manufacture world-class products for the leather connoisseurs and the trend setters of the time, Mayur was born out of high levels of competence, commitment, stringent quality control measures and value addition. Thus a great seed of possibilities was planted by a team of professionals. Today Mayur has made its mark as a manufacturer of PU, PVC and PU-PVC synthetic leather under the seasoned guidance and support by a unit of highly qualified engineers and technocrats.

With a large network of premium products, the guiding principle of this enterprise has always been customer delight, beyond customer satisfaction. And since the limits of technology can be challenged by the vitality of progressive thinking, with constant research and development, Mayur marches on in its global pursuit of opening up a new horizon to the Synthetic leather World. Making use of the best technologies and raw materials available in the world, having implemented the best management practices and always striving to be the best in the business has been the principle of Mayur since its inception. Mayur has responded to changing customer needs of the hour by maintaining stateof-the-art equipment and facilities like a modern 4 Head Italian Coating Line from Matex, a fully new coating line, Embossing Machines, Printing machine, Sueding Machine, Dry and Wet Tumbling Machines. Automated lab with lab-coater from Werner Mathis, Switzerland, SATRA and Bally Flex Testers and other Laboratory equipment for quality control.

Product range of the company includes: Footwear Automotive Upholstery / Furnishing Garments Luggage / leather goods Sports goods

Clients
Few clients

Financial Results

12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Reserves Face value EPS FY10 12m 1647.33 21.92 1669.25 -1389.06 280.19 -5.98 274.21 -21.82 252.39 -90.24 162.15 54.13 366.39 10.00 29.96 FY11 12m 2485.56 21.32 2506.88 -2098.30 408.58 -6.86 401.72 -26.74 374.99 -122.26 252.72 54.13 555.97 10.00 46.69 FY12E 12m 3032.38 23.88 3056.26 -2592.69 463.57 -7.60 455.97 -29.95 426.02 -136.33 289.69 54.13 845.66 10.00 53.52 FY13E 12m 3578.21 26.27 3604.48 -3059.37 545.11 -8.36 536.74 -32.94 503.80 -161.22 342.58 54.13 1188.25 10.00 63.29

Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS 31-Dec-10 3m 688.42 5.58 694.00 -576.07 117.93 -1.98 115.95 -7.14 108.81 -35.59 73.22 54.13 10.00 13.53 31-Mar-11 3m 715.81 6.18 721.99 -619.98 102.01 -1.05 100.96 -7.25 93.71 -27.07 66.65 54.13 10.00 12.31 30-Jun-11 3m 695.77 4.72 700.49 -599.93 100.56 -0.95 99.61 -7.61 92.00 -30.96 61.04 54.13 10.00 11.28 30-Sep-11E 3m 751.43 4.96 756.39 -643.23 113.16 -1.03 112.14 -7.99 104.15 -33.85 70.30 54.13 10.00 12.99

Key Ratios

Particulars No. of Shares(In Million) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV

FY10 5.41 17.01% 15.32% 9.84% 11.72 38.56% 64.99% 0.11 6.78 77.69 4.52

FY11 5.41 16.44% 15.09% 10.17% 7.52 41.43% 63.28% 0.13 4.65 112.71 3.11

FY12E 5.41 15.29% 14.05% 9.55% 6.56 32.20% 50.28% 0.09 4.10 166.23 2.11

FY13E 5.413 15.23% 14.08% 9.57% 5.55 27.57% 43.52% 0.07 3.49 229.52 1.53

Charts:

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Outlook and Conclusion

At the current market price of Rs.351.00, the stock is trading at 6.56 x FY12E and 5.55 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.53.52 and Rs.63.29 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 30% and 28% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 4.10 x for FY12E and 3.49 x for FY13E. Price to Book Value of the stock is expected to be at 2.11 x and 1.53 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.400.00 for Medium term investment.

Industry Overview

The textiles industry in India enjoys a distinctive position due to the pivotal role it plays by way of contribution to industrial output, employment generation (second largest after agriculture) and export earnings of the country. The industry is rich and varied, embracing the hand-spun and hand-woven sector at one end and the capital intensive, sophisticated mill sector at the other. Its association with the ancient culture and tradition of the country lends it a unique advantage in comparison with textiles industry of other countries, thus giving it an uncommon edge to cater to a vast variety of products and market segments both domestically, as well as, globally. The industry currently contributes about 14 per cent to industrial production, 4 per cent to GDP, and 17 per cent to the countrys export earnings, according to the Annual Report 2010-11 of the Ministry of Textiles. The industry accounts for nearly 12 per cent share of the country's total exports basket. It provides direct employment to more than 35 million people.

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Industry sub-sectors The textile industry comprises the following:

Organised Cotton/Man-Made Fibre Textiles Mill Industry Man-Made Fibre / Filament Yarn Industry Wool and Woollen Textiles Industry Sericulture and Silk Textiles Industry Handlooms, Handicrafts, the Jute and Jute Textiles Industry Textiles Exports

Market size The Vision Statement for the textiles industry for the 11th Five Year Plan (2007-12) sees India securing a 7 per cent share in the global textiles trade by 2012. At current prices, the Indian textiles industry is valued at US$ 55 billion, 64 per cent of which caters to domestic demand. The export of textiles and clothing (T&C) aggregated to US$ 22.42 billion in 2009-10. The Government fixed the target for 2010-11 at US$ 25.48 billion. So far during the period April- September 2010, exports of T&C have been achieved at US$ 11.26 billion. Production During February 2011, total cloth production rose by 5.8 per cent year-on-year (y-o-y). During April- February 2011 cloth production increased by 4.5 per cent y-o-y. Export Total textile exports during April-December 2010 registered an increase of 16.54 per cent in rupee terms at Rs 87,582.83 crore as against Rs 75,149.98 crore during the corresponding period of the previous year, according to the latest data released by DGCI&S, Kolkata. The same were valued at US$ 19,217.12 million as against US$

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15,695.07 million during the corresponding period of the previous year, registering an increase of 22.44 per cent. The share of textile exports in total exports was 11.29 per cent during April-December 2010 as against 12.34 per cent during April- December 2009. Technical Textile Segment The technical textiles segment is expected to grow by 11 per cent per annum till 201213 and is likely to grow at 6-8 per cent per annum till 2020 without any policy interventions. If the government intervenes by way of regulatory push, the growth of technical textiles industry can be estimated at 12-15 per cent per annum till 2020, according to Rita Menon, Secretary, Union Ministry of Textiles. She added that the technical textiles segment in India has the potential to attract investment and create additional employment opportunities in coming years. She further said that investments of US$ 1.1 billion are expected by 2012 and employment is expected to increase to 1.2 million by 2012. Government Initiatives

Technology Upgradation Fund Scheme (TUFS) - The Government has restructured the TUFS, the flagship scheme of Ministry of Textiles for upgradation of technology in the textile and jute sectors. The ministry has issued the Government Resolution on Restructured TUFS for the period 28.04.2011 to 31.03.2012 (both the days inclusive) with an overall subsidy cap of Rs 1,972 crore (US$ 0.43 billion) during the period. The objective of the present Scheme is to leverage investments in technology upgradation in the Textiles and Jute Industry, with a special emphasis on balanced development across the value chain

The Scheme for Integrated Textile Park (SITP) - The scheme was approved in July 2005 to facilitate setting up of textiles parks with world class infrastructure facilities. Forty parks have been sanctioned till December 31, 2010 in nine states. The estimated project cost (for common infrastructure and common facilities) is Rs. 4,193.65 Crore (US$ 0.93 billion), of which Government of India assistance would be Rs. 1,419.69 Crore (US$ 0.31 billion).

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The projected investment in these parks is Rs. 19,456.90 Crore (US$ 4.32 billion) and estimated annual production is Rs 33,568.50 Crore (US$ 7.45 billion)

Integrated Skill Development Scheme - The Government launched the Integrated Skill Development Scheme for the T&C Sector, including Jute & Handicrafts, in September 2010. The main objective of the scheme is to address the trained manpower needs of textiles and related segments. The Scheme would target to train approximately 2,56,000 persons during 2010-11 and 2011-12

The government has initiated a number of steps to ensure raw materials security for the textiles industry. In order to balance the interests of all stake holders across the value chain. A multipronged approach was adopted which included capping of cotton exports at 55 lac bales for cotton season 2010 11; and permitting yarn exports of 720 million kgs for the year 2010-11

Fiscal incentives are provided for exports of T&C items under various provisions of the Foreign Trade Policy 2009-14

The textile industry is also being supported with an extensive skill development programme to train 3 million persons over a 5 year period, by leveraging the strength of existing institutions under the textile ministry

India has the most liberal and transparent policies in Foreign Direct Investment (FDI) amongst emerging countries. Under the automatic route, 100 per cent FDI is allowed in the textile sector. FDI in sectors to the extent permitted under automatic route does not require any prior approval either by the Government of India or Reserve Bank of India (RBI)

The government has proposed some more relaxations for the branded garments sector, besides enhancement of duty abatement from 40 per cent to 55 per cent

Investment trends The textile industry plays a significant role in getting the foreign exchange reserves into the country, contributing to approximately 15 per cent of the total exports from

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the country. Exports in textiles and apparel have registered a strong growth in last few years 11 per cent CAGR from 2004-05 to 2007-08. Indias liberalisation of its foreign investment regulations, buoyant domestic demand for textiles, and strong export potential have led to growing foreign investment in the country. The country has become one of the fastest growing destinations for FDI inflows and collaboration. Indias Special Economic Zones (SEZs) attract foreign investment by providing tax incentives, assistance with bureaucratic and administrative problems, and access to reliable infrastructure. Foreign companies have been motivated to enter into collaborations with Indian firms by the increasing profits gains that can be made by producing brands in India and selling them into the Indian market. Indian companies, on the other hand, have been motivated by the scope for gaining technical and marketing expertise from foreign partners.

The textiles industry has attracted FDI worth US$ 956.97 million between April 2000 and March 2011, according to data released by the Department of Industrial Policy and Promotion (DIPP)

Ahmedabad-based textile company Arvind Ltd. has tied up with another major international brand, Geoffrey Beene, LLC for apparel and non-apparel products. Geoffrey Beene has licensed Arvind Retail Ltd. to manufacture and market its men's apparel and non-apparel products

Ahlstrom Corporation has announced investments of EUR 55 million (US$ 79.2 million) in new and expanded manufacturing capacity, including a new medical nonwovens plant to be built in India. The new medical nonwovens plant in India will use spun melt technology and accounts for EUR 38 million (US$ 54.72 million) of the total investment announced.

India and Russia have signed an agreement to increase investment and trade in textile industries in both the countries. A memorandum of understanding (MoU) was signed by the Apparel Export Promotion Council of India (AEPC) and Russian Union of Entrepreneurs of Textiles and Light Industry. The MoU also stipulates the promotion of textile trade, participation in fairs and exhibitions,

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transfer of technology and exchange of know-how in textile manufacturing and processing The Road Ahead India's T&C industry has great potential, and is one of the mainstays of the countrys economy. The industry has enormous opportunities for domestic as well as international investors given its consistent growth performance, abundant cheap skilled manpower and growing domestic demand. With the abolition of quotas, India has surged ahead of other countries and positioned itself as a value-added manufacturer with a varied material base, an educated and English-speaking class of executives with high product development and design orientation. On the global front, India is set to become an even bigger participant, both as a consumer and as a producer. The country offers an attractive combination of a large domestic market, and a base for low cost production. The industry has gained a strong position in cotton based products, especially in the readymade garments and home furnishings segment, which are expected to be the key drivers of growth for the industry. Besides this, the T&C industry is contributing towards promoting inclusive growth. It has been contributing to broad based socio-economic development by providing employment opportunities at local level. The government envisions building state-of-the-art production capacities and

achieving a preeminent global standing in the textile sector by 2020, which includes manufacture and export of all types of textiles.

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Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods D. Ashakirankumar Automobile A. Rajesh Babu FMCG H.Lavanya Oil & Gas T.Joshna Devi Diversified Dheeraj Bhatia Diversified Manoj kotian Diversified Nimesh Gada Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com

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