Cosmo First — Q3 FY25 earnings call

Call held 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

  • 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

  • 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.

Key financials

  1. Consolidated Sales ₹701 Cr +12%YoY
  2. EBITDA ₹86 Cr +53.6%YoY
  3. BOPP Margin ₹21/kg +133.3%YoY
  4. Net Debt ₹900 Cr

What they filed

Q1 FY27: revenue up 41.0%, net profit up 0.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue723 679 687 751 873 +21%820 +21%911 +33%1,059 +41%
EBITDA67 55 59 72 81 +21%50 −9%94 +59%101 +40%
Net profit33 22 17 30 29 −12%17 −23%30 +76%30 +0%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

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

Capital allocation

high confidence
  • Capex ₹430 Cr
    • BOPP Line
    • CPP Line
    • Projects to enhance specialty sales
    The Company's capex in FY25 is estimated to be about Rs 430-450 cr majority of which is already done at Dec 2024. The capex is mainly on BOPP Line, CPP Line and some projects to enhance speciality sales.
  • Debt Net ₹900 Cr · 2.6× EBITDA
    The financials remain strong, the company's net debt position is close to Rs.900 crore which is 2.6 times to EBITDA and 0.6 times to equity.

Guidance & targets

Volume

  • Specialty Sales as % of Total Volume Volume · medium term · High confidence 80%

    From 71% (Dec 24 YTD) today

    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.

    — Neeraj Jain, Group CFO

  • New BOPP Line Additional Production Volume · High confidence 60,000 tons
    But from actual production perspective, we expect around 60,000 tons additional production from this line.

    — Pankaj Poddar, Group CEO

Profitability

  • Incremental Cost Rationalization Profitability · FY26 · High confidence ₹25 crore
    Number two, cost rationalization, we expect incremental cost rationalization of close to Rs.25 crore in FY26.

    — Neeraj Jain, Group CFO

  • Specialty Chemicals EBITDA Profitability · already · High confidence high yield
    The specialty chemical subsidy is advancing well to achieve high yield EBITDA and more than 30% return on capital employed in FY25.

    — Neeraj Jain, Group CFO

  • Sun Control/PPF Business Break-even Profitability · High confidence ₹30-35 crores sales
    So we anticipate that once we cross between window films and paint protection film, once we cross the sale of 30 to 35 crores, we will start making money.

    — Pankaj Poddar, Group CEO

  • Zigly Losses Profitability · quarter-on-quarter · High confidence coming down
    Yes, even rationally we, as a percentage to sales the losses keep coming down in the last quarter even in the absolute term it has come down, next year when we are looking forward to quite a decent growth in Zigly percentages losses will keep coming down quarter-on-quarter.

    — Pankaj Poddar, Group CEO

Capacity

  • Production Capability Increase Capacity · from FY26 · High confidence 45-50%
    Both BOPP and CPP lines will be the world's largest production capacity lines and will increase company production capability by close to 45% to 50%.

    — Neeraj Jain, Group CFO

  • New BOPP Line Commissioning Capacity · FY26 · High confidence Q1 or Q2 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.

    — Neeraj Jain, Group CFO

  • BOPET Film Capacity Growth Capacity · coming year · High confidence 40%
    Coming to your second question, our BOPET film capacity is going to grow by close to 40% in the coming year.

    — Pankaj Poddar, Group CEO

Revenue

  • Rigid Packaging (Plastech) Top Line Revenue · FY26 · High confidence ₹120 crore
    The vertical is moving in line with the plan and we expect more than Rs.120 crore of top line with positive EBITDA in FY26 from rigid packaging.

    — Neeraj Jain, Group CFO

  • Top Line Growth Revenue · next three years · Medium confidence 20% CAGR
    So in terms of your outlook, in your presentation you have mentioned about growing your top line 20% CAGR for next three years. So this is with the base of FY25 it should be around 2800 crores?

    — Neeraj Jain, Group CFO

Sales

  • US and Japan Sales Run Rate Sales · within 3-6 months · High confidence $6 million

    From $5 million today

    So our current run rate has already started touching close to $5 million for both these countries put together, and we expect that they should start touching $6 million within next three to six months.

    — Pankaj Poddar, Group CEO

  • Sun Control/PPF Business Sales Sales · next year · Medium confidence ₹20-30 crores
    We expect that next year we could be doing anywhere between 20 to 30 crores of business, if all goes well for us and here thereafter, we should exceed 50 crores at least.

    — Pankaj Poddar, Group CEO

Market context

  • New Business Verticals (excluding B2C) EBITDA Profitability · FY26 · High confidence positive
    All other new business verticals related to packaging should be EBITDA positive in FY26 except B2C business, which may take some time.

    — Neeraj Jain, Group CFO

  • Sun Control (B2C) EBITDA Profitability · from FY27 · High confidence positive
    Even among B2C business, we expect sun control to be EBITDA positive from FY27.

    — Neeraj Jain, Group CFO

What to watch in Q4 FY25

New BOPP Line Commissioning Status

next quarter
Current Expected Q1 or Q2 FY26
Target Commercial 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.

Risks & concerns

  • BOPP base film margin pressure due to domestic capacity additions

    medium

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

    Management acknowledged

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

    medium

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

    Management acknowledged

  • Commodity downcycle impacting overall margins

    medium

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

    Analyst acknowledged

  • Temporary production line breakdown causing output loss

    low

    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

Q&A highlights

6 direct
Specialty vs Semi-Specialty Film Split and Margins Direct
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

Impact of New BOPP Capacity Commissioning on Margins Direct
So see at this stage what we expected, that next year EBITDA, in spite of the fact that margins will be under pressure should be better, because this is one is a very significant capacity addition, and we stay strong because of a very large specialty portfolio. And other cost reduction measures as well as the new line is far more cost efficient.

Addresses analyst concern about margin pressure from new capacity, stating that overall EBITDA should improve due to new efficient lines, specialty portfolio, and cost reductions.

Asked by Nirav

BOPP and BOPET Current Spreads Direct
It has marginally improved as we speak. ... There also it is marginally improved from the last quarter.

Provides an update on current market spreads for key products, indicating a positive trend after previous pressures.

Asked by Jatin Damania

Ramp-up of Specialty Chemicals Business Partial
See the research driven business completely as we know that the CAPEX invested in this business is very less. All I can say is that we have made a very good product that we expect to scale up quite well in the next two years. Second is, there are two more other products which are expected to be commercialized in next three to six months.

Offers qualitative guidance on the growth trajectory of the high-margin Specialty Chemicals business, highlighting new product launches.

Asked by Jatin Damania

Zigly Demerger Timeline Partial
We are continuously evaluating this, as we said earlier it will take us last time we said three to four years and obviously since then sometime has elapsed. So, I would say that now we should be looking at anywhere between two to three years before we demerge.

Updates the timeline for the potential demerger of the B2C pet care business, indicating it's still a strategic consideration but with a revised timeframe.

Asked by Kamal Jeswani

Sun Shield (BOPET) Revenue and Margin Expectations Direct
We expect that next year we could be doing anywhere between 20 to 30 crores of business, if all goes well for us and here thereafter, we should exceed 50 crores at least. ... close to 30 crores this business will start becoming break even and then start to make money for us.

Provides specific revenue targets and break-even point for the new Sun Shield business, indicating its potential contribution.

Asked by Dinesh Sharma

Mitigating Commodity Downcycle Impact Direct
Already, every year we are displaying that, we had in between couple of bad years where Cosmo still did quite well and so, yes we have done it. Obviously, now the additional factor is that some of the diversifications we have done have resulted in initial learning, losses and so on, but those are also going in the right direction and expected to make money.

Management explains their strategy to counter commodity cycles through diversification into value-added businesses, some of which are already turning profitable.

Asked by Dinesh Sharma

Plastech Business Model and Raw Materials Direct
No, there are different things. We are doing three things there. First is we are making many types of thicker sheets, films... The second thing that we do here is, these sheets are then converted into thermoformed containers... this is basically the business model in plastic and majority of the sales happen to the end brands directly. ... Polypropylene, polyester and polystyrene.

Clarifies the distinct nature of the Plastech business (rigid packaging) from films, its direct-to-brand sales model, and its primary raw materials.

Asked by Vipul Kumar Shah

2 min read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

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