After the two or three years of lower performance, the smallcap stock is back in action. Due to the coronavirus pandemic, it hit hard all sectors but it delivered more than 38 per cent gains year to date, taking its total gains for the past decade to about 900 per cent. The effective valuations, an increase in business share from automotive majors, stable crude oil prices, rising anti-China sentiment and commissioning of a new plant bode well for this company that counts Mercedes and BMW from its clients.
It is worked in the manufacturing of artificial leather, foam leather and other leather substitutes. These products are used in segments such as footwear, furnishings, automotive original equipment manufacturer (OEM), automotive replacement market and automotive exports. The stock has delivered 883 per cent over the past decade, despite a 25% decline in 2018 and a massive 46% in 2019.
This will back on track ever since and has gained about 38 per cent for the year to date. The benchmark Sensex is still declined by 4 per cent for the year. The brokerage said in a note that increasing share of the automotive business, stable crude oil prices, a general focus on value addition and robust financials bode well for MUL (Mayur Uniquoters).
The clients include OEMs, both in India (Maruti Suzuki, M&M, Tata Motors, MG Motor, Honda), globally (VW, Ford, Chrysler). It also serves retail shoe brands such as Bata, Relaxo, Paragon, among others. Anand Rathi analysts said that while the near-term outlook for the stock is muted, they are positive on Mayur for the long term on improving outlook such as good traction in the recently commissioned polyurethane (PU) plant, talks of curbing imports of leather goods from China and robust export opportunity through customer additions.
The stock has already breached that target. On last Wednesday, September 2, the stock traded at Rs 274. Negotiations with BMW are entering the last lap with order flows predicted to start from H2 of FY22 for its forthcoming models. The brokerage said that the dispatches for Volkswagen India will start from FY22, this business has an annual revenue potential of Rs 12 crore.
The East
India analysts said the headwinds of a delay in PU business setup, Daimler
approval and lower margins are now behind the company. Product approval from
BMW is already in place and is improving well. When the demand
environment recovers, the company will report effective performance. They also
added that with PU capacity currently on-stream shortly, Mercedes business
commencement by Q1FY22 and volume recovery in the medium term, they estimate
strong earnings FY22 onwards.
