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All set to move to higher growth trajectory...

About the stock:

Mayur Uniquoters (MUL) is a leading player in the technical textile domain, manufacturing synthetic leather for automotive, footwear & apparels, etc.

* MUL has, over the years, exhibited healthy capital efficiency with five year RoCE at ~21% amid healthy EBITDA margin profile at ~20%+

* It has debt free cash rich b/s with surplus cash of ~| 200 crore (FY21)

FY21 Results:

* MUL reported healthy FY21 results.

* Net sales decline was limited to 3% YoY to | 513 crore

* EBITDA in FY21 was at | 125 crore, up 20% YoY with margins at 24.4%

* Consequent PAT was at | 90 crore (up 12.5% YoY)

What should investors do?

MUL’s share price has been a laggard in the past and has just given CAGR returns of ~5% in the last five years. This was amid a delay in setting up of new plant & high gestation period for breaking into premium auto OEMs

* With new capacities in place and MUL starting to supply to Mercedes Benz (South Africa), we remain positive and retain our BUY rating on the stock

Target Price and Valuation:

We value MUL at | 625 i.e. 22x P/E on FY23E EPS

Key triggers for future price performance:

* Increasing share of supplies of premium products to global auto OEMs

* Resumption of healthy double digit topline and bottomline growth

* Sustenance of EBITDA margin profile in upward of ~24%

* Product profile immune to technology risk, particularly in the auto space

Alternate Stock Idea:

Apart from MUL, in our auto coverage we also like JK Tyre.

* Walking the talk on b/s deleveraging, sweating of assets & capital efficiency

* BUY with target price of | 180

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