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    Cosmo First

    COSMOFIRST
    Capital Goods·12 Feb 2025
    Management Summary

    Cosmo First delivered strong Q3 FY25 results with significant revenue and EBITDA growth, primarily driven by increased specialty sales and improved film margins. The company is progressing with major capacity expansions in BOPP and CPP, and its new business verticals like Specialty Chemicals and Rigid Packaging are showing promising performance. While commodity film margins face near-term pressure from new capacity, strategic cost rationalization and a focus on high-margin products are expected to sustain growth and profitability.

    Highlights

    5

    • Consolidated sales for Q3 FY25 were ₹701 crores, a 12% increase from Q3 FY24, driven by 7.5% higher volume, increased specialty sales, and better margins.

    • EBITDA for Q3 FY25 stood at ₹86 crores, a substantial improvement from ₹56 crores in Q3 FY24, attributed to higher specialty sales, enhanced volume, and improved BOPP/BOPET film margins.

    • Specialty sales constituted 73% of total volume in Q3 FY25 and 71% on a YTD basis for Dec 2024, showing a consistent improvement from 64% in FY24.

    • The Specialty Chemicals vertical is performing well, achieving high-yield EBITDA and over 30% return on capital employed in FY25, with an expected revenue of ₹190 crores and 20% EBITDA margin for FY25.

    • The company's new BOPP and CPP lines, along with a sun control film line, are expected to add to top line and bottom line from FY26, increasing production capability by 45-50%.

    Concerns

    3

    • BOPP base film margins are expected to remain somewhat subdued in FY26 due to anticipated capacity additions in the domestic industry.

    • A temporary breakdown in one production line caused a production loss of close to 5% in Q3 FY25, though an insurance claim is in process.

    • B2C businesses, particularly Zigly and Sun Control, are expected to take time to become EBITDA positive, with Sun Control projected for FY27 and Zigly potentially later.

    What Changed2

    vs Q4 FY25

    Guidance items10 → 15 (+5)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    04 metrics
    1. 01Consolidated Sales₹701 Cr+12%YoY
    2. 02EBITDA₹86 Cr+53.6%YoY
    3. 03BOPP Margin21 Rs/kg+133.3%YoY
    4. 04Net Debt₹900 Cr

    Segment breakdown

    BOPET Vertical
    15% Share of Sales15% EBITDA Margin
    Specialty Chemicals
    — EBITDA30% ROCE
    List

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹430 crores

    Debt

    Net ₹900 crores · 2.6x EBITDA

    Guidance & targets

    15
    CategoryTargetPriority
    Volume
    Specialty Sales as % of Total Volume
    80%
    		High
    Volume
    New BOPP Line Additional Production
    60,000 tons
    		High
    Profitability
    Incremental Cost Rationalization
    ₹25 crore
    		High
    Profitability
    Specialty Chemicals EBITDA
    high yield
    		High
    Profitability
    New Business Verticals (excluding B2C) EBITDA
    positive
    		High
    Profitability
    Sun Control (B2C) EBITDA
    positive
    		High
    Profitability
    Sun Control/PPF Business Break-even
    ₹30-35 crores sales
    		High
    Profitability
    Zigly Losses
    coming down
    		High
    Capacity
    Production Capability Increase
    45-50%
    		High
    Capacity
    New BOPP Line Commissioning
    Q1 or Q2 FY26
    		High
    Capacity
    BOPET Film Capacity Growth
    40%
    		High
    Revenue
    Rigid Packaging (Plastech) Top Line
    ₹120 crore
    		High
    Revenue
    Top Line Growth
    20% CAGR
    		Medium
    Sales
    US and Japan Sales Run Rate
    $6 million
    		High
    Sales
    Sun Control/PPF Business Sales
    ₹20-30 crores
    		Medium

    New BOPP Line Commissioning Status

    next quarter
    CurrentExpected Q1 or Q2 FY26
    TargetCommercial operations commenced

    Why it matters

    Successful commissioning is key for capacity expansion and cost efficiency, impacting top line and bottom line from FY26.

    Yes, or maybe a little more actually, because we are going to commission the world's largest BOPP line, and we expect this to get commission in either first quarter or second quarter of FY26.

    How to verify

    guidance_and_targets[metric='New BOPP Line Commissioning']

    Risks & concerns

    4
    RiskSeverity

    BOPP base film margin pressure due to domestic capacity additions

    BOPP base film margins expected to remain subdued in FY26 due to new capacity coming online in the domestic industry. — Management acknowledged

    medium

    Temporary production line breakdown causing output loss

    A temporary breakdown in one production line led to a ~5% production loss, but an insurance claim is in process to recover losses. — Management acknowledged

    low

    B2C businesses (Zigly, Sun Control) taking time to achieve profitability

    B2C verticals are expected to take time to become EBITDA positive, with Sun Control targeted for FY27 and Zigly potentially later. — Management acknowledged

    medium

    Commodity downcycle impacting overall margins

    Analysts raised concerns about a potential commodity downcycle in FY26, which management plans to mitigate through diversification into value-added businesses. — Analyst acknowledged

    medium

    Q&A highlights

    8

    “You are referring to the specialty films actually. So with respect to bifurcation into specialty and semi specialty, broadly it's 50:50, peer-to-peer or quarter-to-quarter there may be some minor changes in this ratio. While 71% is the YTD number for December 24, we are targeting the medium term to reach to 80% but this obviously will be excluding new capacity for the BOPP and CPP, which will take little time actually to expand specialty further on the new line.”

    Clarifies the current and target mix of specialty films and acknowledges the time needed for new capacity to contribute to specialty expansion.

    asked by Rahul Jain

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Financial Performance Overview

    Cosmo First reported consolidated sales of ₹701 crores for Q3 FY25, marking a 12% year-over-year increase. This growth was primarily driven by a 7.5% increase in volume, higher specialty sales, and improved margins. The company's EBITDA significantly improved to ₹86 crores in Q3 FY25, up from ₹56 crores in the corresponding period last year, reflecting the positive impact of strategic initiatives.

    02

    Focus on Specialty Films and Margin Improvement

    The company's strategy to enhance specialty sales is yielding results, with specialty products accounting for 73% of total volume in Q3 FY25, and 71% on a YTD basis for Dec 2024, compared to 64% in FY24. BOPP margins were ₹21 per kg in Q3 FY25, an increase from ₹9 per kg in Q3 FY24, though slightly down from ₹25 per kg in Q2 FY25. The BOPET vertical, representing about 15% of Q3 FY25 sales, posted mid-teen EBITDA margins.

    03

    New Business Verticals: Specialty Chemicals and Rigid Packaging

    The Specialty Chemicals vertical is performing strongly, already achieving high-yield EBITDA and over 30% return on capital employed for FY25, with an expected revenue of ₹190 crores and 20% EBITDA margin for the year. The Rigid Packaging vertical, branded Plastech, is progressing well and is expected to generate over ₹120 crores in top line with positive EBITDA in FY26, having reached break-even status.

    04

    Capacity Expansion and Future Outlook

    Cosmo First is undertaking significant capacity expansion with new BOPP, CPP, and sun control film lines. These new lines are projected to increase the company's production capability by 45-50% and contribute to both top line and bottom line from FY26. The new BOPP line, expected to be commissioned in Q1 or Q2 FY26, will be the world's largest and is anticipated to add 60,000 tons of production.

    05

    Capital Expenditure and Debt Position

    The estimated capital expenditure for FY25 is ₹430-450 crores, with the majority already incurred by December 2024. This capex is primarily directed towards the new BOPP and CPP lines and projects to enhance specialty sales. The company maintains a strong financial position with net debt of ₹900 crores, translating to a net debt-to-EBITDA ratio of 2.6x and a debt-to-equity ratio of 0.6x.

    06

    B2C Business Development and Strategic Initiatives

    The B2C vertical, including Zigly (pet care) and Sun Control films, is undergoing strategic development. Zigly has seen increased sales and reduced losses over the past eight months, with management expecting losses to continue decreasing quarter-on-quarter. The Sun Control business is projected to become EBITDA positive from FY27, with a break-even point estimated at ₹30-35 crores in sales. The company also expects incremental cost rationalization of ₹25 crores in FY26.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.