Mayur Uniquoters: Revolutionizing Artificial Leather with Innovation and Global Reach

Company Overview

Mayur Uniquoters specializes in the production of premium synthetic leather using state-of-the-art technology, particularly the 'Release Paper Transfer Coating Technology.' The company caters to diverse sectors, including automotive, footwear, furnishing, fashion, consumer goods, and industrial applications. MUL exports its products to over 21 countries and has a primary focus on the automotive industry, serving renowned clients such as BMW, Mercedes Benz, and Bata.

Historical Performance

• Revenue increased by 17.2% to INR 7,934 Cr. in FY23 compared to INR 6,768 Cr. in FY22
• Net profit grew by 10.4% to INR 1,042 Cr. in FY23 compared to INR 944 Cr. in FY22
• EBITDA margins stood at 17.9% in FY23, a decline of 120 bps YoY due to high raw material costs

Industry Analysis

• India's textile market, valued at $223 billion in 2021 with a CAGR of 10.23% since 2016, is projected to surpass $250 billion by 2030
• The Government of India aims to achieve $250 billion in textile production and $100 billion in exports by 2030
• A Rs. 10,683 crore ($1.44 billion) production-linked incentive scheme, focusing on man-made fiber apparel, fabrics, and technical textiles, was approved in September 2021 for five years from 2025-26 to 2029-30

Key Drivers and Investment Thesis

• Dominant Industry Leader: MUL is the largest player in India's thriving synthetic leather industry, which is poised for a ~8% CAGR in volume over the next four years.
• Strategic Diversification: MUL mitigates competitive pressures by venturing into high-margin B2C segments like furnishings, bolstering revenue streams and enhancing overall resilience.
• Production Powerhouse: MUL boasts the largest domestic production capacity, equipped to manufacture 48.60 million linear meters of PVC-coated fabric and 5.00 million square meters of PU annually.
• U.S. & European Expansion: Aligned with global trends, MUL strategically targets becoming a preferred supplier to leading OEMs in the U.S. and European markets, with confirmed orders for new models paving the way for significant expansion.
• Financial Stability: Solid Q2 FY23 performance, with consolidated revenue reaching INR 202.89 Cr., reflects operational efficiency and resilience. Positive growth in both PBT (8%) and PAT (6%) highlights effective management.

Financial Analysis and Valuation

Based on our earnings growth assumptions of 18% for FY24, 20% for FY25, and a 15% growth target for FY26-FY30, along with a terminal growth rate of 11% and a cost of equity derived from a beta of 0.99, risk-free rate of 7.2%, and risk premium of 8.33%, we estimate the intrinsic value of MUL's stock at INR 698. This suggests a potential upside of 25% within the next 12 months.

Recommendation

We recommend a "Buy" rating for Mayur Uniquoters, considering its strong market position, strategic initiatives, and growth prospects in the synthetic leather industry. The company's focus on innovation, diversification, and expansion into key markets, coupled with its solid financial performance, makes it an attractive investment opportunity.

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