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If you look at the financials of the company FY10 sales were about
Rs 963 crore which was higher by 50% compared to FY09. Profit
after tax was about Rs 38 crore as against Rs 29 crore. Which
means an EPS of close to Rs 21 so at current market price of about
Rs 125 the stock is available at a price to earning multiple of about
6.5."
The good part is that the company has been a regular dividend
payer since 1993. Only during one-year, in between, the company
skipped dividend. The company has declared a dividend of 50%
for FY10 also. The current price of the stock is come dividend, so at
the current price of about Rs 125 you get a dividend yield of about
4%."
The world BOPP films market has been growing at 8% p.a., the
growth in domestic market has averaged in the range of 15-20%
p.a. The migration of manufacturing from the developed countries
is also providing opportunities for growth.
Shareholding Pattern
37% 46%
10%
7%
BUSINESS PROFILE: Cosmo Films Limited manufactures bi-axially oriented
polypropylene (BOPP) film utilized in making packaging, labeling and
thermal lamination films. The company's products include wet laminating,
printing and pouching, label films, soap wrap films, over wrap films, tape and
textile, thermal laminating film for graphic finishing and selected value added
films. The company's subsidiaries include Cosmo Films Inc. and Cosmo
International (US) Inc. In January 2009, the company acquired GBC
Commercial Print Finish business. Cosmo Films has a total of 5 plants one
each in Aurangabad, Vadodara, USA, Netherlands and Korea
To strengthen its position in the thermal lamination film segment, Cosmo
Films has announced in January 2009, the acquisition of GBC Commercial
Print Finish Business.
Biaxially-Oriented Polypropylene
(BOPP) films have become a popular, high
growth film on the world market because of
a unique combination of properties such as
better shrinkage, stiffness, transparency,
sealability, twist retention and barrier.
flexible packaging
pressure sensitive tape
printing and lamination
Stationary
Metallising
flower sleeves
cable wrap and insulation
Ingredients
Depending on the size of the film line and how many layers are
involved, the typical flow ranges are as follows:
PP Pellets: 100 - 20,000 dm³/hr or 3.5 - 706 ft³/hr
Masterbatch Pellets: 5 - 500 dm³/hr or 0.18 - 18 ft³/hr
Rework (edge trims): 10 - 5,000 dm³/hr or 0.35 - 180 ft³/hr
PET Chips: 10 - 5,000 dm³/hr or 0.35 - 180 ft³/hr
Additive powder: 1 - 500 dm³/hr or 0.04 - 18 ft³/hr
The desired accuracy is typically ± 0.5-1% at 2 sigma for the base resin
and ± 0.2-0.5% at 2 sigma for the additives.
INDUSTRIAL OVERVIEW
Plastic Industry had its beginning in India in the mid twenties, LDPE
was produced in the late fifties, and HDPE in the late sixties.
Polyethylene has been the most used plastic films in India, and in the
early sixties cast polypropylene has made entry and was accepted
because of its superior properties. Stretching this film, especially in both
directions, produces even superior properties of tensile strength,
flexibility, toughness and such other. The stiffness of BOPP film is three
times that of cast film and eight times that of polyethylene film. Even
though the first BOPP process was developed in Germany in 1935, it
made its rapid commercial entry only in the early sixties. The current
world consumption is one million tonnes and the growth rate around
8%. BOPP made its entry into India only during the eighties, and the
present Indian consumption is less than 1% of the world consumption.
The basic manufacturing plant comprises of compounding
and feeding, extrusion, casting, orientation, gauging, winding, recycle,
Corona treating and profile control systems. The main line plant is
imported and auxiliary equipment and utilities are indigenously
obtained. The first Indian BOPP unit to come up was MM Rubber in
Tamilnadu closely followed by Cosmo films in Maharastra and later by
M P United Polypropylene Ltd. At present, seven units are in operation,
though thirtytwo units took license for this activity. The present
installed capacity is 6 million tonnes production. Jindal films have the
largest capacity of 1, 80,000 tpa followed by cosmo Films Ltd with 70,000
tpa. The Indian market has applications for BOPP in areas relating to
overwraps, inner liners, tapes, pouches/strip packs, print laminations
and decorative and release films and such other. Adhesive tapes, print
laminations, cigarette wrapers and biscuit wrappers together account for
more than two thirds of the BOPP market in India today. It is estimated
that the BOPP demand will go up to 17000 tonnes by 1997 reflecting an
annual growth rate of 13.5%. Of the seven manufacturers, five have
obtained their plants from Bruckner, Germany, one from Marshall
Williams of USA and another from Mitsubishi of Japan. The Mitsubishi
plant is of the Bubble process, while all other plants are of Tenter
process. BOPP is presently manufactured by over thirty companies
around the world. Europe and North America account for roughly 80%
of the total market. Plants of maximum unit capacities of 16000 tpa with
8 meter width of BOPP at speeds of 300-500 meters per minute are also
in use. Tenter is the most widely used process and some of the recent
improvements are automatic thickness and profile controls, and
computerised process controls. A major difference between a typical
International plant and a typical Indian plant is the difference in size.
This results from the larger international market and the consequent
long runs between product changes. Infrastructural weaknesses, the
very high cost of maintenance and spares, and end user requirements
also inhibit usage of large capacity plants in India.
PRICE DATA
117.10
CMP (as on March 26, 2010)
0.48
Beta
2,276
Market Cap ( Rs mn)
138/59
52 Week High-low
14,976
Average Daily Volume
Plastic Industry had its beginning in India in the mid twenties, LDPE was
produced in the late fifties, and HDPE in the late sixties. Polyethylene has been
the most used plastic films in India, and in the early sixties cast polypropylene has
made entry and was accepted because of its superior properties. Stretching this
film, especially in both directions, produces even superior properties of tensile
strength, flexibility, toughness and such other. The stiffness of BOPP film is three
times that of cast film and eight times that of polyethylene film. Eve n though the
first BOPP process was developed in Germany in 1935, it made its rapid
commercial entry only in the early sixties. The current world consumption is one
million tonnes and the growth rate around 8%. BOPP made its entry into India
only during the eighties, and the present Indian consumption is less than 1% of
the world consumption.
The basic manufacturing plant comprises of compounding and
feeding, extrusion, casting, orientation, gauging, winding, recycle, Corona treating
and profile control systems. The main line plant is imported and auxiliary
equipment and utilities are indigenously obtained. The first Indian BOPP unit to
come up was MM Rubber in Tamilnadu closely followed by Cosmo films in
Maharastra and later by M P United Polypropylene Ltd. At present, seven units
are in operation, though thirtytwo units took license for this activity. The present
installed capacity is 6 million tonnes production. Jindal films have the largest
capacity of 1, 80,000 tpa followed by cosmo Films Ltd with 70,000 tpa. The Indian
market has applications for BOPP in areas relating to overwraps, inner liners,
tapes, pouches/strip packs, print laminations and decorative and release films
and such other. Adhesive tapes, print laminations, cigarette wrapers and biscuit
wrappers together account for more than two thirds of the BOPP market in India
today. It is estimated that the BOPP demand will go up to 17000 tonnes by 1997
reflecting an annual growth rate of 13.5%. Of the seven manufacturers, five have
obtained their plants from Bruckner, Germany, one from Marshall Williams of
USA and another from Mitsubishi of Japan. The Mitsubishi plant is of the Bubble
process, while all other plants are of Tenter process. BOPP is presently
manufactured by over thirty companies around the world. Europe and North
America account for roughly 80% of the total market. Plants of maximum unit
capacities of 16000 tpa with 8 meter width of BOPP at speeds of 300-500 meters
per minute are also in use. Tenter is the most widely used process and some of the
recent improvements are automatic thickness and profile controls, and
computerised process controls. A major difference between a typical International
plant and a typical Indian plant is the difference in size. This results from the
larger international market and the consequent long runs between product
changes. Infrastructural weaknesses, the very high cost of maintenance and
spares, and end user requirements also inhibit usage of large capacity plants in
India.
World BOPP DEMAND
BOPP DEMAND
6,648
6,156
5,700
5,270
4,710
6,000
5,000
4,000
BOPP DEMAND
1,000
0
2008 2009 2010
A strong sales performance has enabled Cosmo Films to report a strong jump in the
bottom-line for Q3FY2010. The net sales was Rs 2000mn against 1333mn in the
corresponding quarter last year recording a jump of 50%, and net profit grew by 74%
at Rs 124 mn as compared to Rs 70 mn in the corresponding period last year.
Income
sales Turnover 428.7 459.79 571.16 616.86 693.02 782.86
Excise Duty 37.98 37.8 37.76 36.2 44.02 33.7
Net Sales 390.72 421.99 533.4 580.66 649 749.16
Other Income 2.98 2.58 3.78 10.83 50.27 6.01
Stock Adjustments 3.46 13.82 -9.96 0.14 5.48 2.02
Total Income 397.16 438.39 527.22 591.63 704.75 757.19
Expenditure
Raw Materials 261.21 289.61 342.3 370.8 434.64 505.25
Power & Fuel Cost 25.74 31.43 36.94 38.73 47.72 53.35
Employee Cost 17.71 20.29 24.46 31.51 35.53 38.91
Other Manufacturing
Expenses 3.3 2.52 3.15 3.69 3.47 0.44
Selling and Admin
Expenses 31.84 33.77 45.29 43.66 38.83 0
Miscellaneous Expenses 2.36 2.64 2.98 3.21 3.53 54.22
Preoperative Exp
Capitalised -1.73 -1.65 -1.54 -0.53 -5.04 0
Total Expenses 340.43 378.61 453.58 491.07 558.68 652.17
Operating Profit 53.75 57.2 69.86 89.73 95.8 99.01
PBDIT 56.73 59.78 73.64 100.56 146.07 105.02
Interest 11.53 13.19 17.45 14.88 17.99 15.02
PBDT 45.2 46.59 56.19 85.68 128.08 90
Depreciation 37.03 30.36 25.88 25.31 20.8 28.92
Other Written Off 0.09 0.08 0.08 0.04 0.02 0
Profit Before Tax 8.08 16.15 30.23 60.33 107.26 61.08
Extra-ordinary items 0.73 0.48 0.28 0.53 2.08 0
PBT (Post Extra-ord
Items) 8.81 16.63 30.51 60.86 109.34 61.08
Tax -1.76 3.85 5.68 16.36 21.88 16.48
Reported Net Profit 10.58 12.86 24.82 44.5 42.74 45.82
Total Value Addition 79.21 88.99 111.29 120.28 124.04 146.92
Preference Dividend 0 0 0 0 0 0
Equity Dividend 6.8 7.78 7.78 9.72 9.72 9.72
Corporate Dividend
Tax 0.89 1.09 1.09 1.88 1.65 1.61
Per share data
(annualised)
Shares in issue (lakhs) 194.4 194.4 194.4 194.4 194.4 194.4
Earning Per Share (Rs) 5.44 6.62 12.77 22.89 21.99 23.57
Equity Dividend (%) 35 40 40 50 50 50
Book Value (Rs) 66.05 68.07 76.28 93.2 132.35 150.05
Management Efficiency
Ratios
Inventory Turnover Ratio 4.5 5.71 9.57 11.23 16.07 11.52
Debtors Turnover Ratio 6.21 6.28 6.69 6.58 6.95 6.68
Investments Turnover Ratio 8.55 7.85 13.89 11.23 16.07 11.52
Fixed Assets Turnover Ratio 0.97 1.96 2.54 1.33 1.08 1.28
Total Assets Turnover Ratio 1.4 1.36 1.66 1.74 1.24 1.35
Asset Turnover Ratio 1.23 1.02 1.22 1.33 1.08 1.28
Average Raw Material
Holding 34.01 46.88 30.9 43.18 21.17 --
Average Finished Goods Held 21.23 20.24 8.76 8.72 12.1 --
Number of Days In Working
Capital 76.8 79.28 71.64 70.63 58.35 62.1
Profit & Loss Account Ratios
Material Cost Composition 65.85 68.62 64.17 63.85 66.97 67.44
Imported Composition of Raw
Materials Consumed 21.65 23.36 26.06 29.73 33.19 33.33
Selling Distribution Cost
Composition 6.12 6.73 7.07 6.07 4.33 --
Expenses as Composition of
Total Sales 39.55 40.43 52.01 57.28 44.1 44.67
Cash Flow Indicator Ratios
Dividend Payout Ratio Net
Profit 72.7 68.94 35.72 26.07 26.6 24.72
Dividend Payout Ratio Cash
Profit 24.22 20.47 17.45 16.61 17.88 15.15
Earning Retention Ratio 28.59 27.7 61.24 68.12 70.2 75.28
Cash Earning Retention Ratio 83.94 79.24 81.85 81.21 80.72 84.85
AdjustedCash Flow Times 4.05 4.18 3.54 2.43 4.49 3.54
Net Profit Before Tax 8.82 16.71 30.5 60.87 64.62 62.3
Net Cash From Operating
Activities 29.6 16.68 65.41 52.9 85.9 40.74
Balance Sheet Of
Cosmo Films Ltd. …………………….in Rs. Cr………………………
Sources Of Funds
Total share capital 19.44 19.44 19.44 19.44 19.44 19.44
Equity share capital 19.44 19.44 19.44 19.44 19.44 19.44
Share Application
Money 0 0 0 3.32 3.32 0
Preference Share
Capital 0 0 0 0 0 0
Reserves 108.96 112.89 128.85 161.75 237.84 272.25
Revaluation Reserves 0 0 0 0 0 0
Networth 128.4 132.33 148.29 184.51 260.6 291.69
Secured Loans 182.04 153.78 169.67 149.1 264.74 252.99
Unsecured Loans 11.74 7.97 3.26 1.01 0.01 11.96
Total Debt 193.78 161.75 172.93 150.11 264.75 264.95
Total Liabilities 322.18 294.08 321.22 334.62 525.35 556.64
Application of fund
Gross Block 399.56 412.43 436.64 436.75 598.35 587.51
Less: Accum.
Depreciation 182.81 209.85 234.7 233.26 185.71 213.29
Net Block 216.75 202.58 201.94 203.49 412.64 374.22
Capital Work in
Progress 2.61 8.41 7.51 10.41 0.75 1.92
Investments 46.94 6.77 5.55 6.77 6.77 51.26
Inventories 57.64 74.36 55.96 70.43 58.42 67.93
Sundry Debtors 58.37 76.05 83.35 93.28 93.36 130.96
Cash and Bank Balance 0.43 1.52 3.01 2 1.49 24.16
Total Current Assets 116.44 151.93 142.32 165.71 153.27 223.05
Loans and Advances 20.29 27.92 36.83 54.68 72.99 37.8
Fixed Deposits 2.15 3.28 15.52 5.14 27.83 0
Total CA, Loans &
Advances 138.88 183.13 194.67 225.53 254.09 260.85
Deffered Credit 0 0 0 0 0 0
Current Liabilities 74.39 75.87 73.88 81.8 123.29 118.38
Provisions 8.84 14.33 14.65 29.82 25.61 13.23
Total CL & Provisions 83.23 90.2 88.53 111.62 148.9 131.61
Net Current Assets 55.65 92.93 106.14 113.91 105.19 129.24
Miscellaneous
Expenses 0.23 0.15 0.06 0.02 0 0
Total Assets 322.18 310.84 321.2 334.6 525.35 556.64
Contingent Liabilities 9.1 14.2 8.79 75.54 6.74 28.56
Book Value (Rs) 66.05 68.07 76.28 93.2 132.35 150.05
Comparison Between Cosmo Films and Competitors
Competition
Mar
'10 Mar '09 Jun '10 Mar '10 Mar '09
Sources Of Funds
Total Share Capital 19.44 117.23 25.41 28.26 11.01
Equity Share Capital 19.44 72.38 25.41 28.26 11.01
Share Application
Money 0 35.85 0 0 5.51
Preference Share
Capital 0 44.85 0 0 0
Reserves 272.25 830.41 352.79 143.9 246.22
Revaluation 0 0 0 0 0
Reserves
Networth 291.69 983.49 378.2 172.16 262.74
Secured Loans 252.99 1,300.23 190.36 72.31 617.79
Unsecured Loans 11.96 55.28 38.7 15 0.59
Total Debt 264.95 1,355.51 229.06 87.31 618.38
Total Liabilities 556.64 2,339.00 607.26 259.47 881.12
The stock is available at reasonable valuation, PE multiple of about six to seven and
a good dividend yield of 4%. The short-term trigger for the company and the sector
can come from the fact that in the last few months there has been an increase in the
selling price of BOPP and BOPET without any increase in the prices of raw material,
which means that this quarter, which is June quarter, September quarter these
companies should show higher profits because all the incremental revenues are
going to add to the bottom-line of the company. So at the current price of about Rs
125-127, I do not see too much of downside in the stock. You get a regular dividend
from this company; Rs 5 dividend. So it is something which probably people can buy
and hold for an assured dividend yield of about 4%."