Stock Review: Cosmo Films

 

 

Cosmo Films is a company which manufacturers Bi-axially Oriented Polypropylene Films (BOPP) films and also thermal insulation film. In the thermal insulation film segment this company is the largest player. This company has got two manufacturing plants in Aurangabad, two in Gujarat and besides this the company has got overseas manufacturing facilities in Korea, US and Netherlands. 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.

Besides this the company last year acquired a company called GBC in US, which is into value added products and it is more of a forward integration for Cosmo Films. 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 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 means that 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%.