Mayur Uniquoters is the largest player in the Indian synthetic leather market and one of the largest globally as well. The company is involved in the manufacturing of Poly Vinyl Chloride Synthetic or Artificial leathers and over the next few years will be looking to ramp up its Polyurethane revenues.

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Synthetic leather could find preference in comparison to natural leather as its more environment friendly and also finds higher acceptance among ethical oriented customers which could include vegans.

Additionally, it also provides substantial cost arbitrage and affordability to consumers in comparison to natural leather. Their products find application in Automotive, Footwear and Furniture industries and their client list includes domestic and international auto markers and also various footwear companies.

Hence the company is touted as a proxy play to rising discretionary spends towards fast moving consumer items like footwear, auto, leather goods, furniture etc and its list of clients include Honda, KIA, Mercedes , BMW, Ford USA, Bata, Paragon, Relaxo etc.

Revenue Mix & headed to 1000cr revenue by 2025!

Their revenues are mostly from the domestic market with exports contributing 30 percent of revenues and bulk of export revenue from auto OEMs. On the domestic front auto revenues is accounted for via OEM & replacement sales while footwear sector now contributes around 25 percent of business.

In the last few years, the street has been waiting for growth to ramp up and the managements guidance has been a little sketchy, but they are now indicating that they are in for a phase of good growth for next 2 years with auto export growth expected at a faster clip.

They have indicated ramping up revenue from big international auto makers like Mercedes, BMW and has also added Ford Motors to its distinguished list of clients. The domestic auto segment is also likely to see double-digit growth while the footwear segment has been reeling under pressure but management is optimistic about mid single digit growth.

Overall by 2025 revenues should surpass 1000cr and they have margins levers in place which include ramp up of margin accretive exports, benefit of operating leverage & lower PVC prices.

Financials

Balance Sheet

They have a clean balance with cash at around 170cr and have also returned part of it to shareholders via regular dividend pay-outs and have also done buybacks in past 3 years.

Valuations

From a valuation perspective, the stock does not seem to be significantly undervalued at a multiple of 20x. However, considering the potential for management to reach a milestone of over 1000cr in FY25, the earnings per share (EPS) could rise to 34 per share, making it relatively more appealing.

Shareholding pattern

Moving to the shareholding then , its Promoters hold roughly 59 percent stake while nearly 9 percent is held by some large fund names.

Risks

Risk include what if global slowdown derails their growth plans which in turn will impact profitability as exports are the driving factor and also we understand that all is well between the promoter father son duo but incase of re-Emergence of friction between promoter group could be an overhang for shareholders.

The India PU leather market is currently dominated by Chinese imports and presents a big opportunity but as of last year it did revenues of just 25cr which is a far cry away from its capacity.