Continuing their bullish trend for the seventh consecutive trading session, Mayur Uniquoters (MUL) shares surged by 1.30% to ₹567 apiece in Friday's trade. Over the past six trading sessions, the stock has witnessed a significant rally, accumulating gains of nearly 12%.
With this recent surge, the shares are now just 10% away from reaching their all-time high of ₹626.90, which was achieved in December 2021. Over the last three-year period, the stock rallied from ₹247 apiece to the current level of ₹567, resulting in a gain of 129.55%.
The company is a leading player in the domestic technical textile industry, manufacturing artificial and synthetic leather for a wide variety of applications, including automotive (seat upholstery, inner linings), footwear (shoes/sandals insole, uppers), furnishing, and apparel.
The company serves major automotive OEMs, both in India (Maruti Suzuki, M&M, Tata Motors, MG Motor, Honda, Hyundai, Kia) and globally (Ford, Chrysler, Mercedes Benz).
In a recent report, domestic brokerage firm ICICI Direct Research assigned a ‘buy’ rating for the stock and set a 12-month target price of ₹700 apiece, indicating an upside of 24%.
Growth rebounding after a long hiatus of 6 years
The brokerage said the company has consistently operated in a healthy operational profile both in terms of margins as well as capital efficiency, however, there was a long period of 6 years spanning from FY16 to FY21, wherein its topline ranged between ₹500 and ₹600 crore with growth elusive, testing the patience of the investment community.
The company, however, in this period, was sowing seeds for value-added play, thereby engaging with marquee global luxury car players (Mercedes, BMW, among others), which indeed have a high gestation period of quality checks and approvals, it said.
The seeds sown have now germinated with the company commencing supplies to these players and is guiding for robust growth in this domain, the brokerage noted.
Its primary focus area, auto OEM exports, is expected to more than triple over the next three years, rising from approximately ₹160 crore in FY23 to about ₹600 crore by FY26, as per the brokerage's projections.
Healthy financials, high double-digit growth, cash-positive B/S
With a firm order pipeline both in domestic and export business, the brokerage expects sales at the company to grow at a CAGR of 17.5% over FY23–25E. With an increasing share of high-margin auto export business, operating leverage benefits, and stable raw material pricing, ICICI Direct expects margins to improve conservatively to 20% levels by FY25E.
The company has consistently clocked strong double-digit return ratios, and the brokerage expects the company's RoIC to reach back to 26% from 20% in FY23 and RoCE to 18% by FY25E from 14.9% in FY23. With a controlled working capital cycle, the brokerage says, the company is offering an attractive CFO yield of 4%.
In terms of its balance sheet, MUL has been a debt-free entity for an extended period and currently boasts a net cash reserve of ₹180 crore.
04 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
