Cosmo First Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Cosmo First Ltd (COSMOFIRST) Q1 FY23 Earnings Concall

Management Update:

• COSMOFIRST said domestic demand remains fairly robust due to low packaged food penetration in India.

• COSMOFIRST also said it has placed order for the new BOPP line, which will be world’s largest production capability line, increasing company’s production capacity by close to one-third. This is expected to commission operation from late FY25.

Q&A Highlights:

• [00:16:50] Ravi Naredi of Naredi Investments enquired if the company’s margins will be impacted for the longer term due to new production lines opening in a short span of 4-5 months by other companies. Pankaj Poddar CEO replied that impact is short term as demand is growing at a strong pace. COSMOFIRST’s 65% sales are on specialty where its margins are not impacted.

• [00:22:43] Abhishek Maheshwari from SkyRidge Wealth enquired if the company is still seeing a robust demand from US. Pankaj Poddar CEO answered that demand is very robust and is growing at a good pace.

• [00:23:40] Abhishek Maheshwari of SkyRidge Wealth asked about the revenue expectation from new BOPET facilities at peak utilization. Pankaj Poddar CEO said that at peak utilization, the company expects revenue to be close to INR450 crores.

• [00:24:30] Mukesh Panjwani with Value Securities asked about the targeted revenue generation by current capacity of masterbatch, chemicals and adhesive. Pankaj Poddar CEO clarified that these are large markets and going to take time to scale it up. On a YonY basis, in 1Q23, COSMOFIRST grew three times. With current capacity, revenue can go up to INR300-350 crores.

• [00:27:29] Srinath M from Motilal Oswal asked about the commercial production of BOPP. Pankaj Poddar CEO answered that the project will commission by FY25 and the sales will start coming by FY26.

• [00:30:08] CA Garvit Goyal with Nvest Research enquired about the reason behind the 200 bp fall in operating margin vs. 1Q22. Pankaj Poddar CEO answered that there has been lot of new capacity additions in the market in a bunched manner, which resulted in a temporary demand-supply gap in Indian industry and caused a drop in BOPP film margin.

• [00:35:29] CA Garvit Goyal with Nvest Research asked about the company’s topline shaping up for next 2-3 years based on current capex. Pankaj Poddar CEO replied that in FY26, COSMOFIRST is looking at close to 70% capacity increase and similar kind of revenue growth.

• [00:36:55] Miraj Shah from Dalal & Broacha asked about volume growth QonQ. Neeraj Jain Group CFO answered that on a QtoQ basis there was marginal growth and on a YtoY basis there was 8% growth.

• [00:39:49] Yash Shah from Investec asked about the PetCare segment, if the company is exploring any kind of inorganic opportunities. Pankaj Poddar Group CEO replied that PetCare is an unorganized segment. However, if there are smaller opportunities, the company will look at them, but to look at larger acquisitions there are not too many sizable players.

• [00:40:56] Yash Shah from Investec asked if the company expects to raise any more debt for FY23 and beyond. Pankaj Poddar Group CEO said that the overall net debt, which is at INR340 crore, that should remain range bound. COSMOFIRST do not expect it to increase significantly over the next 2-3 years.

• [00:46:09] Nirav Jimudia with Anvil Research asked about the investments made in specialty chemicals business to reach the anticipated topline of INR350 crores. Pankaj Poddar Group CEO replied that the investment is close to INR35 crores. COSMOFIRST is looking for expansion over next 12-15 months, where it will do the next level of projection for around INR500 crores.

• [00:49:55] Srinath M of Motilal Oswal enquired when does the company expect the new CPP line volumes to increase. Pankaj Poddar Group CEO answered that CPP will come in FY24 and the revenue is expected in FY25.

• [00:54:52] CA Garvit Goyal with Nvest Research asked if the company will be making separate disclosures for the segment results for new segments like Textiles and PetCare. Neeraj Jain Group CFO answered that in due course the company will make is separate. The statutory requirement is once the segment becomes 10% of topline.