COSMOFIRST - Cosmo First Limited Share Price

Cosmo First Limited's management provided a positive outlook during the recent earnings call, reflecting on both current performance and future expectations. Key highlights from the management's outlook include:

1. Capex and Utilization: The company has completed a major capex cycle, investing over Rs.1,140 crores. Future efforts will focus on maximizing the utilization of this capacity and enhancing specialty business profitability.

2. Debt Reduction: The company aims to reduce its net debt, currently standing at Rs.1,215 crores (down from Rs.1,234 crores in September 2025), significantly over the next two to three years with no major capex planned.

3. Revenue Growth: Management anticipates double-digit revenue growth in the upcoming quarters due to improved capacity utilization and enhanced performance from recently launched products.

4. USA Tariff Impact: The recently announced reduction in tariffs in the USA is expected to positively impact profitability starting in Q1 FY27, with an estimated improvement of Rs.50 crores in profit.

5. Segment Performance:

   • Specialty Chemicals: The segment is performing well, with sales of Rs.52 crores and a 25% EBITDA margin. Three new specialty products are set to be commercialized soon.
   • Rigid Packaging: The Rigid Packaging segment (Cosmo Plastech) achieved EBITDA breakeven in Q3 FY26, operating at about 70% capacity utilization.
   • Consumer Business: Zigly (Petcare) has seen over 50% YoY topline growth, shifting towards a service-oriented, high-margin model.

6. Future Prospects: Management is optimistic about pipeline growth, particularly with the specialty segments as they plan to strategically enhance their revenue mix from these high-margin areas over the next several years.

Overall, management projects robust growth prospects, sound debt management, and a strong shift towards higher-margin specialty segments, setting the stage for improved financial performance ahead.

1. Question: "If you can just quantify what was the impact of US tariff in third quarter of FY'26?"
   Answer: The impact was near full, approximately Rs. 8 crores for the quarter, on top of the Rs. 6 crores already reflected in Q2. Overall, we anticipate a full-year effect of Rs. 50 crores on our P&L due to the tariffs. While growth was curtailed, we are seeing renewed customer interest, which could positively impact profitability and future growth.

2. Question: "Do you see any opportunities... with the EU FTA?"
   Answer: Yes, the FTAs with the EU will be favorable for us, as both the Americas and Europe are crucial export markets. We've also initiated a JV in Korea for growth, while Japan will require a gradual entry approach due to its market complexities.

3. Question: "How much has the new line operated in the third quarter?"
   Answer: The new line operated at an average of 70% capacity in Q3. Improvements are ongoing, and we expect to reach full capacity in March as we enhance output.

4. Question: "What level of sales can we start seeing breaking even for window films?"
   Answer: We project that the window film business should break even around Rs. 80-85 crores in sales, supported by increasing contribution margins and reduced costs.

5. Question: "To what extent can we expect capacity utilization... by FY'27 and FY'28?"
   Answer: We aim for an increase of 25-30% output from our assets, particularly in BOPP, achieving full capacity utilization, while focusing on specialty products to enhance margins.

6. Question: "What level of debt do we expect to reduce each year?"
   Answer: We are targeting a reduction of Rs. 200-250 crores in net debt annually, translating to a 15-18% annual decrease, as we harness cash flows from operations without significant capex.

7. Question: "What percentage of our revenue comes from US now?"
   Answer: Our revenue from the US stands at approximately Rs. 400 crores. With the tariff reduction, we expect an improved margin of Rs. 50 crores next year.

8. Question: "How do you see demand-supply balance evolving over the next two or three years?"
   Answer: By FY'27, we anticipate a balanced demand-supply scenario for BOPP in India. However, we expect overcapacity to emerge by FY'28, affecting pricing dynamics.

9. Question: "When can we expect progress from our tie-up with the Korean partner?"
   Answer: While immediate results may not be visible, significant progress is anticipated around 12 months from now, as markets require time for developing new relationships.

10. Question: "What is the current situation of the Zigly business?"
    Answer: Zigly is progressing well, achieving 50% growth year-to-date due to our unique ecosystem in the pet care market. We are on track for a demerger by FY'27.