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Bright outlook provides sustainable growth assurance; retaining a Buy

Encouraging outlook.

A healthy demand environment, raw material tailwinds and operating leverage would boost Mayur Uniquoters’ performance.

Revenue growth boosted by automotive segment.

Healthy increase in off take by Mercedes Benz, BMW and Volkswagen would lift utilisation at the PU plant. Also clients added and strong launch pipelines by OEMs assure sustainable growth for the next 2-3 years.

The benefits of anti-dumping duty would be visible gradually. Solutions for mandatory airbags in all seats are being explored, and have not affected the business till now.

Margin expansion likely.

Easing input cost pressures and vigorous plans to scale up the high-margin furnishing and accessories categories would help gross margin expansion. Also, economies of scale would provide operating leverage to boost EBITDA margins. For wider reach the company is increasing the number of its dealers in home furnishings. It is eyeing a tie-up with the Kolkata-based fashion accessories manufacturer to replace genuine leather with artificial leather for a few clients who happen to command marque brands globally.

Working capital to rise, routine capex to continue.

The furnishings category will increase working capital (stocks). More working capital and regular capex, however, will be funded through internal accruals.

Further buyback not ruled out.

The company has rewarded shareholders with four buybacks in the last 5-6 years; management expects the trend to continue.

Valuation.

We expect 25%/38% revenue/earnings CAGRs over FY22-24 and retain our Buy rating on the stock, at an unchanged TP of Rs.610 based on 15x (unchanged) FY24e earnings.

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