BOPP is recyclable. It could benefit rather that affect demand in my opinion.
Decent results by Cosmo Films. Margin improvement continues. H1 consolidated EPS about 30 Rs.
Good results. US operations have also showed healthy improvement as guided by management. Expect margins to improve further with no new supply coming in over the next 1 year. EPS of Rs 60 looks easily achievable for FY20.
In Q2 concall, SRF has also agreed that BOPP demand supply is getting balanced and things should improve further over next 1 year.
BOPP cycle playing out as expected and alerted last year.
Hi @jitenp sir, you were absolutely spot on on! Where would you say we are in the cycle and how much fuel does it this have left?
I would stay put. As CU increases EBITDA margins can improve. Of course, it will not be linear.
So the Cosmo films profit is corelate to price of raw material bopp and the oil. If the price of these things increase then profit gets lower. But the packing industry is also growing so how we think of it as a cyclical or mid turm story
Does anyone have idea as to why Cosmo films give 2% of dividend yield while its debt is increasing steadily to 640 Crores.
But CU is almost at peak. Topline growth should not be much. Main growth will be at bottomline level as the margins improve led by improving spreads.
How is CU at peak ? You are probably going at nameplate capacity utilization, which might not be the right way to look at it. Actual utlization is much lower than nameplate CU.
It has always been liberal with dividends. Even in worst years (even when making losses), it has given dividends.
What’s the point ? wouldn’t it increase the risk for investors in the event company isn’t able to serve the debt in market downcycle or the excess supply?
The point is that it has managed debt in the past and still paid dividends. Anyways, they have no major plans for expansions currently, so deleveraging should happen in the future. This company has been able to handle cycles well. I have been tracking the company for more than a decade now.
The company is increasing share of value-added films (I still don’t like the word specialty), which have higher margins. But, I still maintain that there is a cyclicality to it, albeit it can be a reduced one.
I always try to give views on the company operations and sector. Absolutely, no buy/sell/hold recommendations on the company.
Disclosure : Holding, with no transactions in last 30 days.
CU and EBITDA margins can be good indicators of demand. Is there any other way to gauge demand better. what are the factors affecting demand? Is the current increase in demand due to better growth in their consumers or is it due to them shifting from other materials to bopp films. Can the increase in EBITDA margins be seen with the competitors too…
Iam working to find out answers to these things.
Disc: academic interest ,no position as of now
Specialty Films - tried understanding it in detail from the company when i visited their plant in December. As per the management some of their specialty films earns upto INR 50/- per kg gross margins against BOPP which had fallen to single digits last year and at about INR 14-15/- per kg in H2-2019. The reason why the company does not convert completely into a Specialty Films manufacturer is that the demand base for these products is very low right now and is developing over time. So Cosmo adds about 10000 tons of Specialty capacity every year and as per the management they plan it to be atleast 1 year ahead of the demand!
BOPP cyclical margins were exceptionally low in 2018 and whatever EBITDA they could generate were mostly on account of the specialty products. Net net my understanding is that the company continues to be cyclical but at the peak of the cycle it could generate higher margins on account of higher proportion of specialty films than what it has done historically. they will continue adding 10000 tons of specialty films every year!
management has said that actual capacity utilisation can only go upto 75% of the nameplate capacity. On tht basis company is operating at near 95% utilisation.
As mentioned by @jitenp, the co has done well to maintain its cash flows during downcycles. It has a good cash flow statement during the rough periods.
Well, the mix from regular films to value-added films can change. The company is constantly increasing the share of value-added films.
yes true, the company has said tht they plan to increase value added by 10000 tons pa and capex requirement for that is not much. Also the concery regarding debt, i had the chance to meet the cfo recently and he had indicated tht 90% of the debt is repayable within 3yrs. Also the comapny has given detailed instalments payable of each debt in the annual report.