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Exciting times ahead

We upgrade our rating to BUY with a revised TP of Rs590 owing to operating leverage at play and a well-balanced mix of export and domestic demand. After 3QFY21’s stellar show, Mayur Uniquoters’ strong performance in 4QFY21 too has given us more confidence in its revenue stability as we remain positive on firms having a good mix of export and local supply. It’s cash-rich position and management’s well thought out plan to cater to global OEMs fortify our thesis of higher ASPs and better operating performance in the long run. Going forward, as more global professionals drive the business, Mayur now has a well thought out long runway ahead of itself, with a potential value of Rs740 in an optimistic scenario (DCF Bull case).

* Strong volume growth continues:

The consolidated revenue came in at Rs1,7847mn, a rise of 36% YoY (up 3% QoQ) for 4QFY21. The top-line increase was mainly due to a ~26% YoY rise in volume sold, which came in at 7.9mn metres implying a blended realisation growth of ~7.4% YoY in 4QFY21.

* Highest quarterly EBITDA ever:

The consolidated gross margin expanded by 98bps to 49% as the RM cost grew by 34% YoY to Rs903mn. The EBITDA came in at Rs489mn, up by 50% YoY, with a margin of 27.4% vs 24.9% in 4QFY20. Other income declined by 16% YoY and the PAT jumped higher by 40% YoY to Rs347mn with PAT margin of 19.4%. Mayur has declared a dividend of Rs2 per share for FY21.

* Outlook:

We feel that as Mayur starts its 7 th PVC line from July 2021, new PVC orders from Mercedes, Volkswagen, and BMW (FY23 onwards) should sustainably take the company’s ASP and revenue higher, leading to positive operating leverage that we have now started to witness. As the response from clients like Chrysler is encouraging and in final stages of discussion, we continue to believe that the PU plant will ramp up swiftly as the economy opens. While the management has hinted at new EV players like Tesla to be potential clients in future, we feel that Mayur’s focus on catering to only premium OEMs should lead to an overall prominent OEM clientele in the future.

* Valuation and risks:

We expect Mayur’s revenue/EBITDA/Adj PAT to grow at a CAGR of 22%/24%/23% over FY21-23E. Better and consistent operating leverage should result in greater sweating of assets, and we forecast ROE/ROCE to climb up to 19%/18% respectively by FY23E. We roll forward our estimate and owing to operating leverage visibility, assign 18x P/E multiple (15x previously) to arrive at our TP of Rs590. Our DCF fair value base TP stands at Rs560 (Bull/Bear TP of Rs740/350). Risks include slower-than-expected recovery in global automobile production due to extended lockdowns.

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