Strategic Analysis

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gap between domestic PU and Chinese PU.

Demand for artificial leather is growing at a fast pace. Peoples preferences are changing and are preferring high quality artificial leather to original leather.

Mayurs bargaining power with its clients is strong as it catering to the organized sector, they require certain standards of quality products that only handful companies provide.

SWOT Analysis

Strength

Market leader.

Good diversification of portfolio.

Dividend payout 135% for the year FY 2011-2012.

Knitted fabric is its largest input after PU and PVC chemicals. Backward integrating into the business, setting up a new factory for manufacturing of high quality fabric will enable to produce high quality leather and drive down rejections.

Installing 5th coating line, increase monthly capacity by 600,000 million meter tons, making 2.5 million linear meters per month.

Current clients include Ford and Chrysler, in the process of making BMW and Mercedes their clients.

EBITDA margins expected to increase from 16% to 18% over the next three years, as a result of capacity expansion and backward integration

Management has successfully made marquee clients in last few years. Has been getting repeat orders and charging 5-6% higher margins than competitors.

Weaknesses

Threat from Chinese PU Manufacturers, once the Chinese RMB depreciates against the INR, export and domestics sales could slow down.

Both the backward integration and expansion projects costing Capex of 50crores which could lead to D/E ratio rising. Leading to a rise in interest cost.

Opportunities

Scope for further penetration in the global markets.

Mayurs user industries are recession resilient.

Economies of scale and economies of scope will kick-in with the current expansion plans, lowering average and fixed costs.

Working capital efficiency, receivables 40-45 days, dealing with organized sector hence risk of bad debt very little.

Raw materials account for 75% of the sales, meaning manufacturing process is not very technology intensive. Risk of rapid technology obsolescence is low.

Threat

Mayurs raw materials are release paper, PU & PVC chemical, and knitted fabric. Prices for all these raw materials are volatile and subject to crude oil price. In the past the raw material prices have risen in line with EBIT margins. Mayur has been able to pass on this cost to consumers but with a 2-3 months lag.

As the industry becomes more organized and competitors catch up, sustaining the same growth rates would become challenging.

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237 crores

purchase resine in granule form

buy from Belgium and Korea

buy release papers

80-90% market is pvc in india

Unorganized sector ladies bag PU is being supplied by China

Mayur is 95% pvc, in 2015 its going to be in PU

Mayur buys its inputs from the organized