ValuePickr Forum

Cosmo Films - Diffentiated player in commodity business

Very good results. The margins have moved up and management expects the margins to sustain. However, looking at historical quarters, there is huge volatility in quarterly gross margins. Last 11 quarters gross margins - 34,37, 32, 29,32,31,30 , 26, 27, 24, 30 (March 19). No clear trend. Very tough to take a call on how this cycle moves. Hence, probabaly, investors are avoiding the stock even though it we annualize the March quarter run-rate if is trading at 3.5 PE and 3% sustainable dividend yield. Also, Specialty plant starting in few months which can add 20 cr to bottom-line on full ramp up.
Disclosure: Not invested, tracking

Cosmo films Q4 conference call updates.

1)Commodity margins in domestic market improved from 4-5rs/kg to 10-15/kg. Margins improved after 2 years due to no capacity addition in domestic market leading to better Utilization of lines and increasing contribution of specialty films. Normalized margins are 18rs/kg.

2)Capex is minimal for next year only 10000 tons specialty films line. It will start from Q2.

3)Industry growing at 8-12%. BOPP growing faster at 1.5 to 2 times Gdp growth rate.

4)No supply coming this year. Next year 40000 tons to come in.

5)Expect to reduce 100-150cr of debt this year. Net debt is 643cr. Debt to equity is 1:1.

6)Mix in sales between Commodity and speciality 55-45.
Prior quarters 65-70%of margin was coming from specialty. Now the mix is 40%-60%.

7)Demand is strong currently. Domestic marketgrowing faster than exports.

8)American subsidiary was Ebitda positive this year. Expect it to improve from here. Earned 500000$ on 33M$ sale.

9)Target is to get 2/3rd revenue from specialty in 3-4 years.

10)Will only expand when debt to Ebitda is more than 2-2.5.

11)Currently having to refuse orders in specialty as lines running at full Utilization.

12)Capacity Utilization is 90+%.

Disclosure : I have a small tracking position

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Good compilation. As was expected margins have started to improve. It all boils to supply-demand. Just keep tracking that.

Did anyone attend the AGM ? If yes, please share notes.

Most of the discussion was dominated by 2-3 shareholders asking for some gifts for attending the AGM.
couple of points as below:

  • the company would continue striving to reduce the commodity component of the business by investing in newer products like synthetic paper etc
  • margins are not completely in their control, however, they will ensure max utilization of capacities
  • the management believes in healthy dividend payouts and subject to profits they would keep paying reasonable dividend to the shareholders

In summary - not too much of a value add as maximum time was taken by the 2-3 shareholders as mentioned above

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Cosmo films Q1 20 results. Margin improvement continues.Cosmo Films Q1 20.pdf (3.2 MB)

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Not able to understand why is SRF saying that BOPP is still in oversupply but Cosmo says that demand-supply is balanced now. Any idea on the same?

Received this question by a few. BOPP CU is increasing. One needs to always look at data more than what managements say. IMHO.

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This was pointed out by CFO in one of the webinars with DSIJ. What he said was that the nameplate capacity calculation is based on a single size, 1 micron, running continuously. This is never the case as there are always different size requirements so that has a turnaround time. So a 75% utilization of nameplate capacity is considered good or “100%”. Cosmo was running at 95% of this 75% utilization.

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Ambrish Jaipuria (Promoter) sold 21000 shares 3 days back.

From the article:

  1. Sachet and small packs of biscuits, photo wafers, savouries, shampoos and several such items help drive sales.
  2. While the small packs enhance the affordability of various goods, contributes significantly to plastic pollution
  3. Govt embarks to cut the consumption of single-use plastics on the 150th birth anniversary of Mahatma Gandhi
  4. 60% for biscuits and 80% for potato chips - comes from packs priced below ₹10
  5. Companies need the change package sizes and switch to eco-friendly and recyclable packages

Seems like this can hit hard the packaging companies and FMCG companies. Any thoughts?

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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.

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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.

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In Q2 concall, SRF has also agreed that BOPP demand supply is getting balanced and things should improve further over next 1 year.

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BOPP cycle playing out as expected and alerted last year.

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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?

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I would stay put. As CU increases EBITDA margins can improve. Of course, it will not be linear.

Hello
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.