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Tuesday, May 19, 2009

Cosmo Films Ltd:-A safe defensive midcap bet

Scripscan:Cosmo Films Ltd
Traded in:Nse-bse

Story:COSMO FILMS is one of the leading players in production of biaxially oriented polypropylene (BOPP) films. The product is used mainly by FMCG players like Parle, Britannia, Hindustan Unilever, Nestle and Dabur, which use tetra-packs and BOPP films for packing their products.Cosmo currently has an aggregate capacity to manufacture up to 68,000 tpa of BOPP films, which will be enhanced to 105,000 tpa by the first quarter of ''10. The company not only supplies to FMCG multinationals operating in India and local players, but has also established its presence in overseas markets like the US and Europe.In India, the company faces competition from Uflex and Jindal Polyfilms. Apart from BOPP films, the company manufactures thermal films with annual production capacity of 21,000 tpa. This is a value-added product, made out of BOPP films, which carries a higher realisation.Though the company has a major presence in overseas markets, it does not face anti-dumping duties, since its sales are still well below benchmark volumes. Over the next two years, Cosmo prepares to decouple itself from the commodity cycle downturn in BOPP films, by actively getting into thermal films. At its current price of Rs 77 the stock is trading at less than five times its FY10 earnings. This is lower than that of its peers such as Uflex. Since Cosmo has one of the highest dividend yields among its peers.Considering all the above mentioned points,It has the potential to move up further in the next six months.A good bet at dips for long term investors.

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