Portugal, Turkey, Canada, Dubai, Russia, Sri Lank , Malaysia, Thailand, Morocco, Nigeria, South Africa , Iran-to name few. This company has been on a capacity expansion spree. Company has regularly added capacity every year. Last year the company added about 35,000 tonne per annum of BOPP capacity which takes the total capacity to about 91,000 tonne per annum of BOPP." 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. 46% 10% 7% 37% Shareholding Pattern Promoter Institutional inveator Private corporate bodies Others
Transcript
Portugal, Turkey, Canada, Dubai, Russia, Sri Lank , Malaysia, Thailand, Morocco, Nigeria, South Africa , Iran-to name few.
This company has been on a capacity expansion spree. Company has regularly added capacity every year. Last year the company added about 35,000 tonne per annum of BOPP capacity which takes the total capacity to about 91,000 tonne per annum of BOPP."
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.
46%
10%
7%
37%
Shareholding Pattern
Promoter Institutional inveator
Private corporate bodies Others
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.
Key Milestones in FY09
Commissioning of new 8.2 meter BOPP line at Vadodara with production capacity of 35,000 tonnes . Agreement for acquisition of GBC Commercial Print Finishing Business from ACCO Brands, USA. Highest ever net sales of Rs 6,548 mn and EBITDA of Rs 1,044.5 mn
Key Growth Drivers To strengthen its position in thermal lamination film segment, the company acquired GBC Commercial Print, a division of ACCO brands of USA, in June 2009 for USD 17.1 million. GBC is an industry leader in thermal films and equipments with three plants in the US, Netherlands and Korea. The deal values GBC at around one-sixth of its annual revenues of USD 100 million. In comparison, Cosmo is right now trading at around one-third of its annualized topline. The demand for packaging film is growing strongly at around 8% globally and over16% in India. To cater to this demand, the company has expanded its capacity at a CAGR of 7.4% over last five years, with nearly 12,800 tonne capacity added in FY09. The demand for thermal lamination, where the company is now a global leader, is expected to grow rapidly as the traditional solvent based lamination is not environment friendly. At the same time, the raw materials prices are likely to remain comfortable due to expected oversupply conditions in the polymer industry with new plants coming up in the Middle East and China.
PRODUCT PORFILE
BOPP Co-ex transparent Films BOPP Films for Pressure Sensitive Films
BOPP Pearlised Films
BOPP Metallized Films
BOPP Antifog Film
BOPP PVdC / acrylic coated Films
BOPP WET Lamination Films (Gloss, Matte, Silky Matte)
BOPP Thermal Lamination Films (Gloss, Matte, Silky Matte. We
can even supply lower micron thermal laminating films up to 20 micron thickness)
PET Thermal Lamination Films
BOPP Over-wrapping Films (Cigarette, Textiles, Flowers etc)
BOPP In-Mould Label Films
BOPP Universal In-Mould Label Films
BOPP Wrap around Label Films
Non-Tear able Synthetic Paper (Visiting Cards, Greeting cards,
Stationary items, Childrens Books & and many more to fulfill your
requirements.
Cosmo Films is an ISO 9001:2001, ISO 14001:2004, AIB & BRC
certified organization.They also supply thermal lamination BOPP,
polyester and nylon based. There are four production lines with
20000 MT/year capacities.
Biaxially Oriented Polypropylene (BOPP) Film
Borseal™ polymers deliver high quality packaging while improving
production efficiency
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.
BOPP film is used in a variety of applications including.
flexible packaging
pressure sensitive tape
printing and lamination
Stationary
Metallising
flower sleeves
cable wrap and insulation
Borealis serves the BOPP market with a homopolymer product in
combination with several Borseal™ skin resins. Based on a special
molecular structure and stabilisation of the resin, these homopolymers
provide optimal mechanical and optical properties, as well as excellent
processability.
Borseal delivers a unique combination of
properties
Borseal™ polymers offer several advantages to
producers, packagers and other users of BOPP
film. Its high clarity and low haze help producers of film or packagers
to create glossy, high-transparency film that enhances the appearance
of packaging or other products.
In addition, Borseal offers high seal strength, even at low sealing
pressures and after surface treatment to keep out moisture and
contaminants. The polymer also has a high melting point for easy
processing combined with a low seal initiation temperature and a wide
sealing window thanks to the balanced polymer structure.
MANUFACTURING PROCESS The production of biaxially-oriented PP, PET, PS, PA, etc. film is a continuous process. In most cases it is a coextrusion process, where up to 6 single and/or twin screw extruders are involved. Usually the base polymer and additives are fed via a continuously operating loss-in-weight feeder into the single screw extruder. A further cost efficient alternative is gravimetric feeding of additive powder directly into a twin screw feeder for optimal dispersion. The melt that passes directly inline via the usual process for cast film, then transfers to longitudinal and transverse stretching elements.
The performance and short term accuracy of the gravimetric feeders is key in this process. This concept gives the producer high flexibility and high quality of the end product, as well as substantial cost savings. When the feeders deliver the desired massflow with an accuracy of ± 0.5% at 2 sigma with a sample time of 5 seconds, the pressure changes at the extruder outlet are minimal, which results in the smooth operation of the film line.
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
CMP (as on March 26, 2010)
117.10
Beta
0.48
Market Cap ( Rs mn)
2,276
52 Week High-low
138/59
Average Daily Volume
14,976
Particulars 2006 2007 2008 2009 2010
Net Sales 424.11 535.61 585.16 654.81 753.26
Net profit 12.86 24.82 45.5 42.74 45.82
Equity Capital 19.44 19.44 19.44 19.44 19.44
Market
Capitilization 134.72 143.27 166.21 120.82 231.63
EPS 6.62 12.77 22.89 21.98 23.57
Debt/Equity Ratio 1.32 1.06 0.79 0.9 0.83
P/E Ratio 10.12 5.77 3.74 2.83 5.06
ROCE % 8% 12% 17% 13% 11%
Product of Cosmo Films Limited
Wet Laminating 18 PCT-2 It is a co-extruded, plain
and one or both side treated Bi-axially Oriented polypropylene film .10 PCT-2 It is a co-extruded, plain and both side treated Bi-axially
oriented polypropylene film.
Printing & Pouching 20 HST-1 It is a co-extruded, both side heat sealable and one side treated Bi-axially oriented polypropylene film. 18 HST-1 (LCF) It is a co-extruded, both side heat sealable
and one side treated Bi-axially Oriented Polypropylene film.
Label Films 38 PCT-1 (LB) It is a co-extruded, plain and one side corona treated Bi-axially oriented polypropylene film. 40 PCT-1
(LB) It is a co-extruded, plain and one side corona treated Bi-axially oriented polypropylene film.
Soap Wrap Films 18 HST-1 (GR-II) It is a Co-extruded,
both side heat sealable, one side surface modified and other side treated Bi-axially Oriented polypropylene film.
Over Wrap Films 18 HST-0 (HS) It is a co-extruded, both side heat sealable and untreated Bi-axially oriented Polypropylene film.20 HST-0 (HS) It is a co-extruded, both side heat sealable and
untreated Bi-axially Oriented Polypropylene film.
Tape & Textile 23 PCT-1 (HCL) It is a co-extruded, plain, one side treated Bi-axially Oriented polypropylens film.29 PCT-1 (HCL) It is a co-extruded, plain, one side treated Bi-axially Oriented
Polypropylene film.
Thermal Laminating Film for Graphic Finishing 24 PCT-2
(DL) It is a Bi-axially Oriented Polypropylene film, uniformly
extrusion coated with adhesive all along the film surface, which enables lamination by heat and pressure with paper products. 27 PCT-
2 (MDL) It is a Bi-axially Oriented polypropylene film. Uniformly extrusion coated with adhesive all along the film Surface, which
enables lamination by heat and pressure with printed-paper board.
RONW % 10% 18% 27% 19% 17%
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.
4,7105,270
5,7006,156
6,648
2006 2007 2008 2009 2010
World BOPP DEMANDBOPP DEMAND
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2008 2009 2010
World BOPP Demand and Supply
BOPP DEMAND
BOPP SUPPLY
Column1
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.
Profit & Loss Accounts of Cosmo Films
Profit & Loss Account Of Cosmo Films Ltd. ………………………….in Rs. Cr……………………………
Total Expenses 652.17 1,962.34 1,726.15 546.08 326.39
Cosmo Films
Jain Irrigation
Supreme Ind
VIP Industries
Kemrock Indus
Mar '10 Mar '09 Jun '10 Mar '10 Mar '09
Operating Profit 99.01 457.61 289.35 100.17 92.42
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%."
