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Ladies and gentlemen, good day, and welcome to the Mayur Uniquoters Limited Q2 FY '23 Earnings Conference Call. Hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, sir.
Yes. Thank you, [ Enda ]. Good afternoon, everyone. On behalf of Monarch Networth Capital, it's my pleasure to host the senior management of Mayur Uniquoters. Today, we have asked Mr. Suresh Kumar Poddar, Chairman and Managing Director of the company; and Mr. Vinod Kumar Sharma, CFO of the company.
I would now request the management to provide some initial comments on the results. Thank you, and over to you, sir.
Yes. Thank you, Rahul. Good afternoon, dear investors and analysts. Ladies and gentlemen, it is a great pleasure to be here to share with you the performance of Mayur. Thanks for giving your precious time to join Mayur Uniquoters Limited Q2 FY '23 Conference Call.
Mayur Uniquoters Limited being a market leader in the synthetic leather industry and an organized player has been able to leverage the emerging opportunities and delivering exemplary performance in past both -- past years, both in national and international business markets. Now we would like to start the financial highlights for Quarter 2 FY '23 under review. We will also reply your queries after our review on financial results for the quarter.
The company has achieved revenue from operations on a stand-alone basis, amounting to INR 194.5 crores, PBT INR 32.47 crores and PAT INR 25.39 crores during the quarter, which is slightly decreased by 3%, 10% and 11%, respectively, on a Q-on-Q basis. The revenue from operations on consolidated basis is INR 204.51 crores, PBT INR 235.09 crores and PAT INR 20.17 crores, which has increased by 2%, 4%, and it's the same PAT respectively on Q-on-Q basis.
Our endeavor is to make the company a preferred supplier for the leading OEM, especially in U.S. and European markets. We are also pleased to share that your company is already approved by Mercedes-Benz, BMW and Volkswagen, India. And supply also started from us to Mercedes and Volkswagen for their model. The product supply to BMW is expected from February '24, but the small quantity, we are currently also supplying through the Thailand window. Monthly quantities are around 4,000 meters at the EUR 10 per meter, which is coming around INR 33 lakh per month. And regular supply will start nearly 40,000 meters per month from February '24.
Our company has also entered into the sell agreement with Baxter India for our product supply to Hyundai Motors plant within and outside India and supply also started in India in June quarter. We have also put up a forward integration line of flame lamination, which was also all earlier getting done from our [ third ] supplier or vendor. Company has also decided to put up a [indiscernible] plant for which necessary project equities are expected to start soon.
In automotive sector, we have been selected for many incoming new models in export and domestic Auto M for which supply will start in the year '23/'24 and '24/'25. So we are expecting a very good performance in coming next 2 years. This year also, we are expecting better performance than last year.
While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responses towards society. Under the CSR programs, we are contributing to our foods, oxygen plants, safety kits and the company has also adopted many schools for education of children. The company has worked on education for all and underprivileged children. Various health care initiatives, especially child skill development, water for all, sanitation in school area, distribution of books, bags, cloths, and most importantly, family planning and family welfare schemes. The state government has utilized these initiatives taken by Mayur on various platforms. And I'm thankful to all the investors for their valuable time to those who became the part of this earning call.
With this positive note, I would like to conclude and request you all to open the forum for questions. And we also request that due to time constants, we need to end this call within 45 to 50 minutes. So therefore, request to kindly avoid repeated questions during the call. And volume data will not be discussed during the call. Therefore, please avoid volume-related queries. Thank you.
[Operator Instructions] The first question is from the line of Mohit Khanna from Banyan Capital Advisors.
My question is regarding your initial comments. I think I've not got it correctly. So the supply for BMW will start from February 2023?
No. No. 2024.
That is the regular...
February 2024.
February '24. Okay. Okay. So -- and then the forward integration that you just mentioned, could you just elaborate a little bit more on that?
Flame lamination. Forward integration.
This flame lamination, you see that you make a trim that time before that, you have to laminate foam -- U-foam. You understand? So that is done by the separate laminator. But now we have started our own. So that to customers, we can laminate and give it to directly. Otherwise, they have to take our material, than they have to bring somebody here by and then get it again. So we have put up our own plant. It's more than...
Will this result in realization improvement and any margin improvement for us?
Yes, yes.
Yes.
And what the number here a ballpark?
We are adding value to our product. This is, you can say, kind of a forward integration. There also you make little bit money.
So what would be the price differential in realization and margins? Is that compared to that...
It is very critical, it's very difficult to say because somebody asked 2 mm thickness, somebody 3 mm, somebody 5 mm. And then the density is different, 60 density, 80 density. So in nutshell we can say that by doing this, we are getting extra profit out of lamination.
Okay. How much CapEx did we do for this lamination?
About INR 3 crores.
INR 3 crores. Okay. Anything else that is under the plan for this year and next year in terms of forward integration or any CapEx plans?
So, so far, we are doing perforation also that is already we are doing from last 2 years. And that percolation we are increasing. Now we are ordering another machine. Perforation machine from Europe, which will come in next 6 months' time because the demand is increasing. So at the moment, we -- in forward integration, we are in 2 areas, foam lamination and perforation at the moment. Towards the integration after that, that is the only question that with manufacture our [indiscernible].
Our next question is from the line of Viraj Kacharia from Securities Investment Management.
Just 3 specific questions. Firstly, if I look at our overall growth rate. Growth in sales for this particular quarter and if I compare both year-on-year and sequentially as well, it seems to be below what the industry growth has been across segments. So can you just provide some perspective in terms of which segment you are seeing lesser growth or the growth probably, and how is the growth trend has been across different segments?
You can note down the total volume length over the past quarter. In last quarter, we sold 70 lakh meters. And this quarter, we have sold 75 lakh meters. So 7.5% growth is there in volume.
So has the price corrected and hence, we are seeing a muted sales growth? I mean can you give segment-wise growth? I mean how it has performed?
Segment-wise growth, we can say export in general, we have grown 4.5%. And the auto section we have grown around 30%.
In domestic.
In domestic. And in export, it is down, 21%, is down in the volume term. And remaining is a little bit less reduced or the decrease [indiscernible].
So if we look at exports [indiscernible] year-on-year?
[Foreign Language]
Sir, this is quarter-on-quarter or this is year-on-year, sir?
It's a quarter-on-quarter.
Okay. So any particular reason why there's a weakness in, say, exports, footwear and other segments?
The problem is the chips problem is still going on and all the car manufacturers, they are using those chips on the models where they make more money. So less profit items, they are reducing and they have a -- so that's why it is happening. And I think to the next quarter -- 1 or 2 quarters that should come in line. And furthermore we are getting more business for new models. And for existing models, where we are not in a [ big one ]. That business will start coming within 3 months to 1 year time. we will have more than [ INR 150,000 ] [indiscernible] business per month, which will be about -- you can multiply by 8 years for that.
So for BMW also, I think the earlier communication was we were expecting around Q1 of 2023, FY '23. So Q4 FY '23. And now what we're saying is in 2024. So any particular reason why this has been pushed? And the...
Very difficult to say any reason for automotive industry. I mean they keep on changing some time suppose [Foreign Language]. Whatever information we are getting accordingly we have taken. So this is -- now this is confirmed 100%. We have got order also that by '24 first quarter, we have to start supply, '23/'24 last quarter for us.
Okay. And in terms of margins, if I look at this particular quarter, we did something like around 38% gross margin and 17% EBITDA margin. So is now the bulk of the high cost inventory in terms of the [indiscernible] prices and other, is that largely behind? And I mean, how should we understand overall margin for us over the next few quarters? So if I look at the major commodities, we have seen a major moderation. So for us, when we look at our overall margins, we are at the lower end of the historical range. So how should one understand this over the next few quarters?
Can you summarize your point?
So my point is, if I look at this particular quarter as well, sequentially and both year-on-year, we have seen margins being at the lower end of the historical level. So how should one understand margin moving for us over next few quarters. So is there any one-off impact in this particular quarter in terms of high cost inventory or any one-off expenses?
[Foreign Language].
You see even as this margin effect from the year '23/'24 and '24/'25 because the business will start improving in export OEM from next year, '23/'24, and '24/'25 for which we have already got the business and the production will start. First, it will start from the second quarter of '23/'24 and then it will keep on increasing quarter-to-quarter for next 1 year after that. So when we go for that, then margin will automatically increase because of the OEM, the problem is that the less in margin, one of the reasons is supplies has reduced [indiscernible] export OEM because of these problems. But to solve these problems because this problem will continue. So the only way is to increase the models business. So we are trying to get a business for the models, which we are not having or the new models.
So for that, we have already started getting the business. So that because even you see, we used to supply 150,000 yards per month, which has come down to 110, 115 -- 115,000 to 110,000 because of these chips [indiscernible]. But now that will increase. We hope that by '24/'25, we should be able to -- now today, we are selling 110,000 to 115,000, but by estimation is that in '24/'25 -- year '24/'25 we should be able to sell minimum 300,000 yards other than what we are doing today in export.
Okay. Just one last...
Especially for U.S., not for BMW and Mercedes because the [indiscernible] going only with U.S. [ data ].
So sir, are these primary to -- for Chrysler or these are some new [ OEs, ] we have got new orders, and we are expecting them to materialize next year and the year...
This order is for Chrysler and Ford. Ford is also very, very active now. We have given 3 [indiscernible] for which we are quoting the prices, and that is concern that is also about volume but that will take at least 1 year time. But now they have started asking themselves. And this increase, what I'm telling you is for Chrysler, but from different tire 1. The supply is made -- the purchase is made by the OEM from different tire 1 manufacturer. So previously, we had 2 tire 1 manufacturers. Now we are adding 2 more tire 1 manufacturers. So that's why our sales will increase.
[Operator Instructions] The next question is from the line of Kunal Shah from Carnelian Capital.
I actually could not understand the volume part. So I have 2 questions, sir, as the question was put by 1 gentleman before as well. We see a cross passenger vehicles, at least for the domestic markets, that the volumes have been very good. But when we observe our revenue in comparison to quarter-on-quarter or year-on-year, there seems to be a decline. So our decline could be because of the raw material pricing, which is linked to crude going down.
So just wanted to understand 2 things: volume data, how should one look at that? Second is, you mentioned that there was 10%, 70 lakhs volume increasing to 75 lakhs. So still, the revenue and margins were impacted. So if we can help understand these 2 particular aspects.
Hello. You raise one by one question. So your first question then...
Sir 2 questions I had. First question will be that our revenue from first quarter to second quarter, right, increased from 70 lakhs to 75 lakhs. Correct me if I'm wrong.
Correct. Correct.
Right? But still, when I see our revenue, okay, on a quarterly basis, it has come down from INR 201 crores to INR 195 crores. So I understand that would be because of the raw material price [indiscernible] crude.
It is because price reduction.
Correct. Correct. But what about the margin, sir? Because the volume has increased, our EBITDA per meter should not have kind of reduced then right with increased volumes -- so I wanted to understand what has happened to our EBITDA because volume has increased but EBITDA has not increased. So is there a lag in the pricing? Or what is the case or we have -- product mix has changed and therefore no increase in profitability?
Volume has increased, but the prices have gone down. And mix also -- product mix has also changed [indiscernible] mix is also changed like export OEM has reduced to that. So the margin also reduced. You see there is good margin in general export and OEM exports. And these auto OEMs are very, very competitive because there are so many players, so we cannot have that kind of margin.
Okay. Okay. So when do we see this export volume also picking up now, sir, which will have an impact on our profitability on the upper side?
As I told you in '23/'24 and '24/'25, the volume will increase to a minimum to double -- more than double. Eventually, if that happens, then margin will also increase.
Okay. Okay. Okay. So what is the bottleneck right now for exports, sir? Is it approvals are taking a little longer? Or there is demand issues? What is the bottleneck presently?
They have also good demand. But as I told you, because of the chip shortage is still going on. They are making those articles where, those cars where they are getting more profits. Some cars are like in Mahindra, today some -- this heavy car, SUV and all that with price SUV 1 year waiting period. So now as I told you in the [indiscernible] that we are increasing the number of customers. We are trying to increase the number of items, number of items means models. And this has already been awarded. And as I told you from '23/'24 and '24/'25, the export business will be at least 2.5x than what it is the next 2 years. Profit will also increase.
Okay. Okay. Okay. And sir, what is the client that we have added in the current quarter? You mentioned some Hyundai, I could not hear, pardon me for my excuse. You mentioned that BMW basically will be from FY '24. But you did mention something about Hyundai as well, right? So am I missing out something?
No, I have said that BMW, we are already doing about INR 30 lakhs business per month, which is very small quantity going to [indiscernible]. But from '23/'24 last quarter, we will [indiscernible] business of at least INR 4 crores per month from BMW.
Our next question is from the line of Depesh Kashyap from Equirus Securities.
Sir, on the margins, again, I just want to understand that the PVC resin prices have corrected INR 30, INR 35 per KG since the last quarter. But when I look at your RM cost rate per meter, that has [ just corrected ] by INR 14. So do you think your margins are going to improve when your lower cost inventory comes through in the next quarter?
See, it is very difficult to say at this juncture for the local market. As I told just now that export has got a better margin and it will import. Now the problem in Indian market is there are so many Indian customers -- sorry, manufacturers who supply to these OEMs. And then whenever prices down, they immediately reduce the prices to get more and more business [Foreign Language]. When your prices are increasing, that time you get benefit because you have already have the stock. And in when your prices are going down, then you are losing because you have a high price raw material in your stock. So that's why this is taking place. This is maybe for 1 or 2 quarter both. After that, it should be stabilized what we take because there is very down sales in the [ world ] also.
It's not affecting us. As I told you, because even if the market goes down, going down already, but our sales will increase in export [indiscernible].
Yes, rupee depreciation will also help you. So margins should improve going forward.
Yes. Yes.
Understood. Sir, secondly, on the PU sales, if you can give us what was the sales in this quarter? And how are you looking at now the PU material?
So there are 2 types of PU we are making. One is that you wish the plant is in Gwalior, whereas I told you, a lot of problem of -- by traders in under [indiscernible] started showing less quantity now they have started showing PU, instead of PU, PVC and clearing the PU material in the name of PVC because we have put anti-dumping duty of [ INR 46 ] [indiscernible] per meter just 2 months back. But things are little bit improving. But it will take some time. But so far as there are 2 kinds of PU, one is high solid PU, which is used only by automotive; industry. So we got 1 item sanction from Chrysler motor and their Malaysia part, they have already started buying. That is around $22, $23 [indiscernible] and which begin supply -- immediately start supplying.
Then you can say from January, we concerned that 25,000 meters per month from Malaysia. And then we are talking to the -- this American factory also price refractory. If that goes on, it's going on trial. And it will go on. I mean, maybe in the next 6, 9 months, rather same quantity will be started from them. So that's why I said that I look better future in '23/'24 and '24/'25 because this business happened if I have 60,000, 70,000 yards per month and within next 6 months or 1 year time, then you multiply by $20, how much it's got 6 to 20. How much?
60.
[indiscernible] $20. Can you -- just 1 minute.
$720.
[indiscernible] which is about INR 9 crore business per month. Right. So there is very good chances for automotive industry. And then now we have started this polishing business also. We are having to have 1,000 dealers within there has a good margin or it is [indiscernible]. And hopefully, within 2 years' time, we should start input [indiscernible] .
So Vinod, sir, if you can help me with the sales in this quarter, please, PU sales?
Set last quarter is like 15,000 meters.
15,000. So this is including the 7.5 lakh meter that you or this is separate?
7.5, what?
7.5 that the number you gave of PVC, that was only PVC, right?
Yes that 7 5 is inclusive PU, that's inclusive.
Our next question is from the line of Awanish Chandra from East Limited.
Sir, you talked about domestic auto markets. Could you give some color on domestic footwear market, how things are shaping up? Are we doing better quarter-on-quarter in terms of volume? Just some indication on the business?
Automotive domestic?
Yes. Footwear domestic, sir.
Footwear domestic. It is going same to same, a little change at the lower side, but it is growing. 22 lakh meters we have sold in last quarter and against the 23.80 lakh meters in Q1, footwear.
Okay. So any hope of traction in coming quarters in footwear business?
See footwear will be better, but November will be a little bit down because after Diwali and all that worker goes to their native places. So there is a shortage and then people keep much more [ stock ] during this festive season because they are selling mainly for 15 days. So in that time, they have to keep the stock, like automotive industry also sold very good in October months, but they are also a little bit down in this month. From December, it will start picking. From third week of November, you can see because the workers will also come and then January will be much better because January [indiscernible] so people postpone for 1 month, 1.5 months also a little bit, that say that, okay, I've got 20 model instead of 22 model. So November will be a little bit down and then it will pick up from this.
Okay, sir. And sir, one last question you highlighted that after PVC resin prices stabilize at some level then we can go back to stabilize the margin. So what would we stabilized number for you? Currently, we are doing 17, 18 in 2 quarters.
[Foreign Language].
17%.
18% -- 17.5%. Now it may be increased by 1%, 1.5%, 2%, it all depends on the situation but it will increase. And the actual increase will be with the [indiscernible], as I told you. We are looking for the customer where we can get more realization. But it takes time. There is too much competition. Now in auto OEM or footwear, there are lot of factories are there. That they just want to sell the material, new comers are coming. They are reducing the prices, just to get identity. But still, we are getting much better profit. We just go on the study all levels of industries in India. Top 5 industries, you go and see the balance sheet. Their profit PBT is not even 5% to 6%. So all [indiscernible] getting advantage because we are all top [indiscernible] products. That's why we get margin. That's why we test the quality product and choose specific buyer, those who are interested in quality products, new things and taking a little bit time in the footwear industry.
Nowadays the price is not dependent totally on the raw material. Prices are dependent on demand and supply. How is your demand? If the demand is good, you get a better price. If demand is less then you not get a better price. [Foreign Language] because the demand is reducing, that's why they are reducing the price. One year back, the demand was okay. So they are increasing the price. So 50% is the raw material cost and 50% is demand and supply for any material, raw material to increase and to decrease. So it is very difficult to predict the margin. But I can tell you it will be better. From next year, I'm talking '23/'24, '24/'25.
[Operator Instructions] The next question is from the line of Nirmal Shah from Seraphic Management.
Yes. Sir, my question was with respect to the outlook for exports in coming 2 quarters. Like as we speak, we are already in the middle of third quarter. And at least on the semiconductor chip side, the volumes are improving on a quarter-on-quarter basis for all the OEMs. So do you see some sort of a improvement even in the coming 2 quarters notwithstanding your comments on FY '23 and FY '24, but with respect to second half of current financial year.
[Foreign Language] please?
Outlook next 2 quarters [Foreign Language] next 2 quarters.
Coming second half of current financial year, sir.
So I think it will -- should be same like what it is or a little bit more.
Sir, but the chief availability has started improving since last month or 2, shouldn't it also impact you as well?
[Foreign Language] Q2 July to September, the volume was 14.69%. [Foreign Language] Volume for domestic it has increased by 18% and value increased by 19% quarter-to-quarter between last quarter and this quarter. So auto OEM sale is increasing. Again, volume-wise also it has increased 22%, which is not a better [indiscernible].
[indiscernible] replacement has also increased by 30% in quantity.
Sir my question was for exports, sir, but...
To export, I'm telling you there is a problem little bit in export and even then exports...
No because that serious issue, sir, would remain the same, either for domestic or export. The chief issue is in general for the entire sector...
No, no, no, it's not general. It's not is general. But anyway, the people in the U.S.A. are producing those items, [indiscernible] chips which were they get more profit. Now some of the items which we were very much [indiscernible] previously, that model, they have a 0 because they are not making profit. So that's why I told you [indiscernible] that we are going for another model. So many other models so that even if the chip shortage is there, our business will go up. I'm talking about those models, which are already doing good. There, we are going to get a business in '23/'24 and '24/'25.
So in summary, you're saying the models for which you got the orders, you don't see any probably a robust outlook for those models and it looks like it will continue for a while. It doesn't look like a short-term issue. The models for which you already have contracts, right? It doesn't seem to be encouraging you for waiting on those models at least because whatever you are talking about are looking for the new models and the new contracts?
Of course. So I could understood now that you cannot put all your eggs in 1 basket. So to get a regular business and get an improvement, you have to get business for more and more models. So even if the business is down, you are not down that way. [Foreign Language]. They are 4, 5, 6 different interior manufacturer. Some are pros, some are going from different people. But gradually, we are making good relation with them, then they are at the -- with our supply is also [Foreign Language].
We'll take the next question from the line of [ Hitesh Sharma from White Sky. ]
I just want to check what is the import component of the raw material? And what is our market share in the footwear and auto? And I see lots of competitions putting up the plant from Europe and the Far East. So how do you see your market share going up or down?
Market share will be down [Foreign Language].
I told you about '23/'24, '24/'25, it will increase. If it increase, eventually market share will increase. It's not that those model I'm getting is for me only. It is from the existing supplier also, I'm taking out the business.
Because European and the Far East people are setting up their plants over here in India.
Yes. So there is -- even if the people are putting up a plant here in India, why? Because they want to get out of China as much as possible. And the cost is also increasing as you rightly said in Europe and America. So actually, the business will come to Asian countries, no doubt.
[Foreign Language] from last 3, 4 years, every year, it is in increasing. [Foreign Language].
How much is an import component of your raw materials, sir?
Raw materials means fabric is our local. We are manufacturing ourselves. 70% of our requirement, 30%, we are buying from outside. And other raw material chemicals only PVC resin up to certain quantity maybe 20% or 25% from Indian [indiscernible] manufacturing company. They are suppling 75% of my resin is also coming in [indiscernible] 50% deported, 50% local.
So that means the dollar price going up. We are having lots of pressure on raw material.
Sorry.
If the dollar price [Foreign Language].
[Foreign Language].
If that be the case, any plan to double your capacities? If there -- other people are coming, why Indians are not expanding the capacities?
Indians are expanding capacity like anything [Foreign Language].
Mr. Hitesh Sharma, sorry to interrupt. May we request you to return to the queue. There are several participants waiting for their turn, sir.
We'll take our next question from the line of Dhruvesh Sanghvi from Prospero Tree.
Yes. Sir, [Foreign Language].
This is a very typical question. I have told that, I'm trying to export more and more so that I get a better margin. [Foreign Language] because OEM export is very important for us. [Foreign Language], we are starting this retailing of furnishing material. Of course, that will take 3, 4 years, but it will keep on moving and it will give a good margin. [Foreign Language]. But that takes time. It cannot happen overnight. [Foreign Language].
[Foreign Language].
[Foreign Language].
We'll take our next question from the line of [ Manoj Dua ] from Geometric Securities and Advisory.
[Foreign Language]
[Foreign Language].
Mr. Poddar, we are not able to hear you that clearly, sir.
Yes. Now voice is clear?
Yes. Now it's fine. Sir, if you could just repeat the last few sentences.
[Foreign Language]
[Foreign Language].
Mr. [ Manoj Dua ], I'm sorry, we'll have to put you back in the queue as there are the participants waiting.
We have time for one last question that's from the line of Aman Shah from Jeetay.
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[Foreign Language]
[Foreign Language]
[Foreign Language].
And that we expect by next year should inch up to 3 lakh meter per month over a period of FY '25.
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[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language].
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[Foreign Language]
Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.
I thank all the investors for their time to listen to us. And I can simply say that the company is trying its best to get maximum margin to do the maximum business as the competition is increasing. So to compete in the market is nowadays is very, very difficult thing. But still, we are managing. As I told you, please go ahead and see the margin of all the leather cloth companies in the world, what kind of a margin they are having. Now we are having more margin because of our continuous focus on the business and on the products. And to work working all over the world, wherever we can get the best price for best product. So please be optimistic and we'll definitely give you the good business in the next 2 years, and we'll continue to do that. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.