300% return in 15 months: Analysts see further upside in this multibagger

After a subdued performance for almost 50 months, this smallcap stock has delivered nearly 300% return to investors since the lows of March 2020, taking its total gains to 1,000% during the past 10 years.

Mayur Uniquoters, market leader in India’s PVC synthetic leather industry with customers in both the automotive and footwear segments. It also caters to US auto original equipment makers – a market no other domestic company has managed to penetrate.

Market watchers believe that hopes of a good earnings trajectory, rise in business share from automotive majors, rising anti-China sentiment and export opportunities from new customers like BMW and Mercedes bodes well for the company. Shares of the company have advanced to Rs 493.60 on June 16, 2021 from Rs 43.88 on the same day in 2011. Meanwhile, shares of the company witnessed a correction of 78% between January 2018 and March 2020.

“The scrip has been considerably de-rated since FY18 after earnings having declined,” Anand Rathi Shares of Stock Brokers said.

Report card

Overall, the net profit of the company has grown around 14% annually to Rs 89.75 crore during the past 10 years. Profit after tax of the company stood at Rs 25.27 crore in FY2011. On the other hand, net sales of the company increased by around 8% annually to Rs 512 crore during the same period.

For the latest quarter ended March 31, the company posted a 40% growth in net profit at Rs 34.66 crore against Rs 24.83 crore in the same quarter last year. Total income increased by 34% YoY to Rs 183.45 crore.

“This was the best-ever reported quarter for the company with exports growing 23%, domestic auto OEM sales 35%, auto replacement 44% and footwear 70% YoY. FY21 revenue dipped 3% as volumes declined 9% YoY. The PU plant is yet to see traction as its commissioning in March 2020 was followed by Covid-related lockdowns that dampened the footwear market,” Bank of Baroda Capital Markets said in a report.

Should you buy?

Anand Rathi Share and Stock Brokers Limited has revised the target price upward for Mayur Uniquoters at Rs 625 (from Rs 474 earlier). “We continue to favour Mayur for its leading position in artificial leather, brighter outlook due to good traction at the recently commissioned PU plant, talk of curbing imports of leather goods from China and robust export opportunities from new customers,” the brokerage said.

Management of Mayur Uniquoters saw good demand traction till Apr 2021 from both the auto and footwear segments, but lockdowns across markets ate into sales in May and June. However, the company is hopeful of better demand post unlocking from Q2. Mayur Uniquoters has started supplies to Mercedes, South Africa, largely from Q1FY22 and expects business to ramp up further from Q3. BMW has also approved its products and supplies should start from Q1FY23. The company also believes that around 24% margins are sustainable due to a rising share of higher-margin customers in the sales mix.

Bank of Baroda Capital Markets has raised FY22 and FY23 PAT by 8% and 12%, respectively, to factor in the above-expected margin guidance. It has also raised the March 2022 target price to Rs 560 (against Rs 495).

“We like the company for its growth prospects and strong balance sheet, we see limited upside in the wake of a 26% run-up in stock price over the past four months,” the brokerage said.