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Earnings Call Analysis
Summary
Q2-2024
Mayur Uniquoters Limited, a synthetic leather market leader, notes a 1% revenue increase in Q2 FY '24 with revenue at INR 202.89 crores and improvements in PBT and PAT by 8% and 6%, respectively. The company is optimistic, expecting significant OEM export growth in 2 to 3 years, with supplies for new models starting soon. The export segment dropped by 20% this quarter but is rebounding. Growth is anticipated for exports, replacement market, and domestic auto (40%, 12-13%, respectively), while footwear declined 20% due to regulatory changes. Mayur is projecting a brighter next 6 months and double-digit growth in auto export by year's end, with margins also increasing by about 8% due to improved export business.
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Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Mayur Uniquoters Limited 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, Jacob, and good afternoon, everyone. On behalf of Monarch Networth Capital, it's our pleasure to host the senior management of Mayur Uniquoters. We have with us Mr. Suresh Kumar Poddar, Chairman and Managing Director of the company; and Mr. Vinod Sharma, CFO of the company.
I would now request Mr. Vinod Sharma to start the call with opening remarks, then we'll move to Q&A. Thank you, and over to you, sir.
Thank you. Thank you, Rahul. Very 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. for giving your precious time to join Mayur Uniquoters Limited Q2 FY '24 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 opposites and delivered exemplary performance in past years both in national as well as international business markets.
Now I would like to start with financial highlights of Q2 FY '24 under review, and then we will also reply your queries after our review on financial results for the quarter. The company has achieved revenue from operations on consolidated basis is INR 202.89 crores, EBITDA INR 42.71 crores, and PAT INR 32.42 crores.
In the quarter, the revenue has increased by 1%, and the PBT and PAT have increased 8% and 6%, respectively. Our endeavor is to make the company a perfect supplier for the leading OEMs in overseas market -- domestic as well as overseas market, especially in U.S. and European regions. We have been selected or received -- and received good and confirmed orders for some new models in export as well as domestic markets. And looking to current situation, our OEM export sell is going to -- expected to have a good increase in next 2 to 3 years for which the supply to some of the new models have already started. And some models is expected to start in coming quarters of current as well as next [ 2 ] financial years. So we are hoping a very good performance in these 3 financial years.
While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities towards the society and that the corporate social responsibilities programs contributed to our harding and regular plantation plan do -- to do a larger scale in coming years. The company has also adopted many happy schools for education of children. The company has worked on education for all and underprivileged children, various health care initiatives, especially child skill development, water for all, sanitation at school area, distribution of books, back clouds and other items, and most importantly, family planning and family welfare schemes in the villages. Estate government has recognized these initiatives of company on various platforms.
And I'm thankful to all the investors for their valuable time to those who became the part of this running call. With this cursory note, I would like to conclude and request you all to open the phone for questions. [Operator Instructions] And we will not discuss volume data. So please avoid volume-related queries. Thank you.
Over to Rahul.
Operator?
[Operator Instructions] The first question is from the line of Awanish Chandra from MSIS.
Congratulations for that -- for a good set of performance in challenging environment. Sir, 2, 3 points. First, we heard about the labor strike situation in the U.S. market. So what is the current situation and how it is going to affect us?
It has started in the month of September. And you have to watch -- no, no. [indiscernible]. It was down in September and October. 2 months, it was affected, although it was not 100% partly because automotive industry has got so many plants to understand. Maybe one company has 5 plants, another company has 4 plants in the U.S.A. So out of that, a few plants were closed. Now everything has been opened up from last 3 days. And because of that, the sales was down by 22%, 25% in automotive OEM export. Now it is all open, and now we are getting orders in full swing.
Okay. So it was just a one-off thing? We will continue our run rate? We'll continue to grow?
Oh, yes, yes.
Okay. And how was, sir, PU? Any change there? Any volume increase there? I mean, how was the approximate business during this quarter from PU business?
PU business?
Yes, Gwalior.
In last quarter, it was 2 -- we have sold 2 lakhs meters in PU.
Okay. So any chance of ramp-up, sir? We have been hitting the same number quarter-after-quarter. Any commentary on that?
So you see that things are moving better last month. We have sold 100,000 meters on lakh [indiscernible]. Is quarter now.
2 lakh around, I guess, [ last week ].
Yes.
2 lakh.
It was 2 lakh. But in October, we have sold 1 lakh meter. And remember also, we think to reach 75 actually because of this Diwali holiday and all that. For PU, we're talking to multinational companies with good brands. They are coming and visiting us asking us for samples. We are giving them samples also. Of course, it will take some time, but we are very optimistic that things will start coming in, in next 3, 4 months' time.
Okay. And sir, one last thing before I come back to the queue. You talked about last time also on the BIS thing that what we are business is getting hard due to that. So any improvement on that side or situation is still there?
The government has extended the time limit up to December for BIS. But people are after governments that don't introduce it, but government is going to introduce. So people are a little bit scared and they are reducing their stock because from January, they will not be allowed to solve without BIS.
So that's why the lifting is slow. And practically, if you say the business was down by 20% this footwear because of this BIS. Fortunately, our sales has grown 40% in auto replacement market and 12% to 13% in domestic auto again. That's how we could and is figure in the sense.
Okay. And sir, we are flat on a half yearly basis on the sales. So any guidance over there, how we can end up this year? Any change in earlier guidance?
And then last year with [indiscernible].
On next 6 months, it must be better because I'm very much optimistic for auto OEM. Now we'll get -- we already have a good number of models which is approved, and that is starting. That has already started. Some will start in January, some will start in March, like that. So next 6 months must be better than what it was.
The next question is from the line of Viraj from SiMPL.
Just 2, 3 questions. First is, if you can give me the sales mix for the quarter on different segments and similar mix for the same quarter last year.
Can you repeat your question?
Can you give me the sales mix from different segments for Q2 2024 and similar number for Q2 2023?
[indiscernible].
We have told you now. The total volume was 70 in this quarter and 70 in last quarter.
Can you -- no, can give you the mix sales mix from different segments, so auto export and auto domestic replacement for...
We can...
That's why I told you that export is -- was 20% down this quarter and auto OEM was 12% up. Quarter replacement was 40% plus. Footwear was 20% down, and other items was 5%-plus.
Okay. Got it. So in auto export, we saw -- you talked about sales now being at the normal level now -- coming back to normal because of production.
Yes, yes, yes. Actually there's no run. Now was a little bit down. But overall, it will be much better.
So the kind of growth we were expecting on a full year basis, do we still expect that to kind of -- so are we expecting that to assume the sales, which we couldn't supply in the last 2 months?
We could not get your question.
So next -- say, next 5, 6 months to recover the kind of loss in production we had for last 2, 3 months?
[Foreign Language]
Next 6 months may it will be covered.
Next 6 months may it will be covered. [Foreign Language]
So on a full year basis, we were expecting around at least double-digit growth in auto export. So are we still expecting that to come this -- in 2024?
Double-digit growth will come at the end of the year, yes, yes.
For FY '24, yes?
Yes, yes.
Okay. And sir, in terms of the pot market, can you just give some idea on what is driving the degrowth?
Market degrowth [indiscernible].
Yes. Viraj, as I told you that because of BIS, market is down. And the government has given time up to December. So I think from February, March -- from, you can say, February, March, yes, the thing will start improving. Because there is a lot of problem with footwear industry because of this BIS small-scale industry are not able to read these things. So they are fighting for it.
So I think there will be improvement, no doubt, because footwear industry is a basic industry of the population. So that cannot be down so much. But last summer year, February, say, [Foreign Language].
Okay. And just one last question. Sir, you talked about exports being down by 35%, quarter export. But if you look at the subsidiary sales, the consol minus standalone, we have seen a growth in sales in the subsidiary accounts. So how do you kind of [ reconcile ] the 2?
[Foreign Language]
[Foreign Language] 20% down or...
[Foreign Language]
Step back further the order next year.
Next 2 years, may we are expecting very good increase over there.
Have already have orders with us.
Something around INR 203 crores. And if we take a look at stand-alone sales, it's around INR 184 crore. There was INR 20 crore subsidiary sales, which has seen a very healthy growth compared to last year. So if I go are down, then what explains the subsidiary sales of...
[Foreign Language] The growth will be driven from 24 to 25 this year compared to 22 to 23 in sales. There may be not very big growth. But as you have seen, bottom line is improving. And because this export business is going to increase here, we have good margin. So the margin will increase. Margin [indiscernible] [ but up 8% ].
[ Last year, 8% ] [Foreign Language]
[Foreign Language]
[Foreign Language]
Ladies and gentlemen, we have lost the line for the management. Please hold while we reconnect them.
[Technical Difficulty]
Ladies and gentlemen, we have the line for the management reconnected. Thank you, and over to you, sir. You may proceed.
Yes. Who was online asking some questions?
So sir, we have the next question from the line of Shashank Kanodia from ICICI Securities.
Sir, congratulation on a good performance on the margin front. I just wanted to check, are these margins sustainable should going forward as given the fact that the product mix will improve with auto exports gaining traction?
[indiscernible]
Sustainable margin [indiscernible]
Yes. Yes, we are expecting to be sustained.
Okay. And secondly, sir, give me maintaining a guidance of INR 900 crores of top line for this year and INR 1,100 crores for next fiscal. So now will you be revising them? Or how do we stand today?
What you said? We could not get you or...
In the last few con calls, you have been maintaining a revenue guidance of INR 900 crores for this year and INR 1,100-odd crores for next fiscal year. So now how do we stand today, sir, given the fact that first half was slightly flattish and -- or footwear is still not out of the woods?
In the first half, we have achieved the same figures, numbers of top line but better than -- in bottom line better than last year. And we are expecting that these numbers will increase in the coming second half.
[Foreign Language]
No, no, no. [Foreign Language]
[Foreign Language]
We have no problem, Ana footwear down because of this BIS and exports may occur. [Foreign Language]
We are trying our best to reach INR 900 crore. [Foreign Language] Last year said to increase og or profit of margin be better increase.
Yes, definitely. From last year, it will be increased in top line and bottom line, both.
[Foreign Language] target case given large part of Auto exports external?
Growth, we can assure you. But numbers, we can't give you a confirmed number of it. But growth definitely will be there.
[Foreign Language]
Actually open exports to grow next [ 3 years ] [Foreign Language] We can't tell right now. But this is sure that after this year, in auto export, the growth will be minimum 22%, 25%.
We have the next question from the line of Vivekkumar from Bestpals Research and Advisory LLP.
What are you going to guide this year? And you said your exports would be around INR 400 crores, INR 500 crores in this year. Is it -- are we still on the same business? So this year, what will be the guidance -- revised guidance because of this supply slowdown?
So it could be nearly, nearly double-digit growth will be there in this year also.
On export OEM, what is the figure that you're in you will go to in the next 3 years? INR 500 crore, just in that?
No. We cannot give you the number, but we can give you the growth -- expected growth. And that already told you, the export OEM, growth will be there nearly 20% [ every year ].
Okay. So overall company-level growth will be almost, sir, for next year?
Definitely double digits.
So high -- because in the last call, [indiscernible] for next year, you can take 20% growth. So that's why I'm asking this.
That's why I'm telling you it's double digits. It could be 15%, 20%, so could be. So that's why I'm telling you that double-digit growth will be there. Definitely, it will be there.
[Operator Instructions] We have the next question from the line of Viraj from SiMPL.
Sir, question was in exports -- in auto export. Are we seeing any delay in new launches -- commercialization of new launches?
[Foreign Language]
Growth -- tremendous growth, we are expecting in OEM, both in export as well as domestic. So that -- some of the models, they are taking the supplies from us. And in coming 2 years, some of the models will start. So our growth will definitely going to increase in next 3 years, including this one.
So my question was, sir, that in the second half of this year, we were expecting some new models to commercialize. So we were expecting supplies to stop for some of the new models in the second half. So is that largely on track? Or are we seeing any delay in that?
No. There's no delay in some of the models because we told you this year, some of the model will start and supply has also started to U.S. market. And in South Africa, BMW is also going to start in -- next year. And the orders which we have received -- confirmed orders will also going to start as per the schedule.
There could be some 2 to 3 months here and there because of their plan. But yes, we have received the confirmed orders, and we are telling you based on their plan and orders. So far, there's no change as informed by them.
Okay. And in this particular quarter, we saw some sales of subsidiary in U.S. and Africa. We saw sales of around INR 20 crores. So if I just have to understand the inventory in the warehouses or in U.S. or Africa, what would that be at right now?
Sorry? Regarding inventory or that -- what do you know?
So I was trying to ask, sir, that if you look at in second quarter, in the standalone, we did a sales of INR 184 crore. And when I look at consolidated financials, we did sales of around INR 203 crore. The subsidiary sales of INR 20 crores is what we have done. And this is despite the degrowth which we are talking about in export -- auto export. I was just trying to understand -- yes?
Sell from India because of that labor is tight problem. We have reduced the sell from here, but we had the inventory over there in subsidiaries' warehouse. So the supply were given from the warehouse and the sale was from sellers done from there. So this [ decrease ] is from the warehouse material -- warehouse inventory.
Okay. So right now, the inventory at the warehouses would be at a much lower level compared to the normal, which we would like to keep, right?
Because we have started increasing our inventory in warehouse as per their requirement. So the transit material also reached -- more or less inventory was -- level was same or a little bit higher. And gradually, it will come down.
In terms of the income.
And just one more question on the raw material, what we see the major raw materials for the cost produce. There has been a considerable moderation. So in terms of the end markets which we cater to, either the auto OE in India or exports, I mean, how are we seeing -- are we -- is there a pressure to price or pass on the lower raw material prices? Or any perspective in this, either in auto or footwear or any of those segments? How is the overall price environment in each of these markets?
[Foreign Language]
[Foreign Language]
Actually, it depends on their request and situation and their requirement.
So in footwear, have you taken any price cuts, sir?
Footwear, price cut? Footwear on the price cut?
[Foreign Language]
We have reduced our prices in footwear because...
[Foreign Language]
Not big.
And just last question. We were in discussion with some of the footwear majors for this whole PLL scheme in Southare. A lot of foreign footwear players like Nike and others were looking to set up the facility. So we were in discussion with them for supply for the PU material. So any update you can give?
The discussions and meetings are going on, and we are expecting. But not yet received any...
We are doing something...
And they have also taken samples from us and bidding for their final...
No, no, listen to me. These big brands are not easy to decide immediately. What they are doing, at least they have started coming to our Gwalior plant. 3, 4 big brands a listed with their people, and they are asking us for the sample. When somebody is asking for the sampling, that means it is definitely they are interested.
And now because of China problem, these brands are interested to concentrate in India also. So these things -- the big brands are just like automotive industry. In automotive industry, it takes 1 year, 1.5 year time to get to visiting time for 1 year up to [Foreign Language], it takes time. But -- it takes time. But once it is there, like it automotive [Foreign Language]
They don't throw out their customer suppliers just like that. [Foreign Language] specific brand under the. Was just a brand allegate, they will buy from us. If there is any problem from my side, then only they will change the supply. Otherwise, they don't change the supply.
Now because as it is for market is becoming very competitive in India, every time some new companies are coming and everybody is reducing their prices. Therefore, I have decided to go in for branded products, which have good price. And they -- once they are -- we are approved, they will nominate us all over the world. So this thing takes time, but I'm very sure that something will happen.
And one more thing. We are appointing a marketing person who is well connected with all these big brands. He's a German guy. He's coming to India for interview in the next month -- I mean, December -- sometime in December. And he's very expensive, but he knows all the big brands. So we are -- I'm trying my best from all the sites because I have decided that I will go for these big brands.
How do I got entry? How I'm making profit? Because of automotive OEM. There is a huge difference between automotive OEM, Indian OEM and export OEM because their quality and here quality are totally different. So that's how the same thing.
Now if you go to the market, you will find one good best sports shoe of India brand, you will get in 3,000 or 3,500. But all these foreign brands are, I mean, from INR 6,000 to INR 30,000, INR 40,000. And people are buying. So by end over is to move to them, and I'm trying my best. And definitely, we will be successful. I'm 200% confident. Because so far, as my point of view, I have no issue.
And then further, our -- this business -- retail business of Banesco, that is also growing. We have already made 400 dealers, and we are going to make another 600 dealers within next 4, 5 months. So that will also increase. You see, now we are going in a very systematic way.
Now what is happening? Most of our products are B2B. Now why we are going and furnishing B2C? So that we have very good margin. Here also, retail business, it takes time. But you have to start some time. And we are very sure that we will 100% be successful because the sales are increasing every day.
The next question is from the line of Alisha Mahawla from Envision Capital.
Sir, INR [ 200 ] crore revenue is a quarterly. If the export revenue [Foreign Language]
Total export, INR 52 crores per quarter may and general exports [ of ] INR 15 crores and INR 37 crores at auto OEM.
[Foreign Language] I know INR 20 crores, INR 25 crores has got delayed because of the strike. [Foreign Language] Is it possible to manufacture will also to earlier?
HTA auto export is salad compared to last year will be a little more because 2 months are despite sale was down by 30% to 35% due to strike. So this will recover. I think this year, we will have more sales compared to last year, but it will not be very significant because of this problem. But from '24-'25, you will start seeing the growth will be fantastic. Are we very the approximate? [Foreign Language] because of all these problems [Foreign Language] And then it will keep on increasing.
[Foreign Language] And the value is also very high. So it will be good this year, may not be that big volume you will see. But from '24-'25, it will be very high because all the orders are with me. Do you understand my point?
Yes, yes, yes. Yes, sir. Understood. Sir, next question is [indiscernible]. We had won some more orders on the auto side, both domestic and export. Can you talk about it [Foreign Language] for some time now?
[Foreign Language] 80% business considered. [Foreign Language], which will be the same quantity what it is in Mercedes.
Mercedes-Benz.
And then I can say in not sell, there is a very good future in automotive.
[Foreign Language] Sorry. Go ahead. Hello?
You have got your question?
[Foreign Language] So have you got any new orders? Because this quarter is saying is [indiscernible].
[Foreign Language]
Any confirmed order in Milan? How much would they be?
Confirmed order?
[indiscernible] confirmed order...
[Foreign Language] Confirmed orders, which we have received in our hand.
Okay. [Foreign Language]
[Foreign Language] Every quarter, some orders are getting started.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
Due to time constraints, that was the last question. I now hand the over -- I hand now the conference over to the management for closing comments.
[Foreign Language]
[Foreign Language]
Hello?
Yes, sir, you may proceed for the closing comments.
Closing comment, closing comment.
Okay. Thank you very much to all of you giving us your precious time. And in nutshell, I can say that there is a very big future -- good future in our company because of automotive business and furnishing business and footwear also. As I told you, that we are moving towards big brands. So the profit of margin should also increase and sales volumes should also increase. But everything takes a little bit time. These things take time.
You will see the real result from '24-'25. Because automotive -- most of the orders are with us. So there is no issue. And we assure you the best of to present to my all investors the good results of the company. Thank you.
Thank you.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines