As we are aware, long-term investors always searching for early
signs of emerging trends and try to make benefit out of it. Since our
government already declared their aim to make India as a manufacturing hub and
taking lot of efforts in this direction. We all know, without
developing Electronic Manufacturing, it is not easy to convert India as a
manufacturing hub to the world and recent issues related with semi-conductor
shortage underlining this fact. With this background let us look into a company
that may benefit immensely from India’s efforts to become an electronic
manufacturing hub and increasing Electric Vehicle (EV) penetration.
Government support with incentives is the major attraction of
common man to shift to EV for the time being. But factors like skyrocketing
fossil fuel prices, increasing awareness about environment protection may
result in a natural shift though it may take some time. Still there is lot of
experiments happening in the energy saving space and personally I am expecting
emergence of a breakthrough technology in this field which can revolutionize
the EV usage. It may happen in the form of quick charging- long lasting
batteries that will reduce the effective cost and positively impact ease of
usage. Because of this reason, I am not very enthused in the highly proclaimed
‘Lithium Ion Battery stories’ and not aggressively betting on such companies at
least till this industry show widespread acceptance even with the current limitations
of Li-Ion batteries. In this situation , let us look into a company that is expected to benefit from electronic manufacturing as well as EV penetration in spite of the
battery we are going to embrace in future.
THE INDUSTRY
Whatever be the battery pack, ‘Ferrites’ are unavoidable part of
an EV and more than that for the electronics industry. Ferrite can be defined
as “Any of a class of metal oxides
which show ferrimagnetism; used in transformers, inductors, antennas, recording
heads, microwave devices, motors, chargers ,loudspeakers (copied from
publicly available sources). Ferrites are generally divided into two - Hard
Ferrites and Soft Ferrites. Hard
ferrites have high coercivity, so are difficult to
demagnetize. They are used to make permanent magnets for applications such as refrigerator magnets, loudspeakers, and small electric motors.
Let us look into the application of soft ferries in various fields. In automotive electronics soft ferrites find applications in Battery Management system, DC-DC converter, Car security, Keyless entry system, Auto start/stop, Battery Charger, Lighting ..etc. Another emerging opportunity is in the field of Solar inverter that is gaining wide acceptability in recent times. LED lighting is another big opportunity for ferrites. Smart Energy meter is another big emerging business opportunity for this industry. Among these let us look into EV opportunities specifically. Since magnetic systems used in many components like transformers PCB ..etc., this product is critical for an EV .It is used mainly in EV charger and conversion units as part of Line filters, Inductors, transformers..etc .Ferrite core transformers are present in PCB also that find applications not only in EV but electronic industry as a whole. This clearly means demand for ferrites will increase in tandem with the EV penetration and India’s efforts to make our country a manufacturing hub going forward.
THE COMPANY
The company we are trying to study is BSE listed Cosmo
Ferrites . Yes , the same company covered in this blog about 10 years back around Rs.13 .Few of my old readers may doubt why it is again now after more than 10 fold rise in its price. Changed business potential is my only answer for this question. This company belongs to the same business group that owned
another listed company Cosmo Films (market cap of around Rs.2800 Cr) which is operating
in packaging related business. This business group is perceived as clean and
minority shareholder friendly one. Manufacturing plant of Cosmo ferrites
located at Solan, Himachal Pradesh. Alisha Coils and transformers – a division
of Cosmo Ferrites- manufacturing SMPS Transformers from 10W to 250W as forward
integration. Citing better business prospects on account of emerging trends in
user industries, company now enhancing its production capacity by 50% from 2400
MT to 3600 MT at a cost of Rs.30 Cr. As per company estimate contribution from
enhanced capacity will start to reflect from first quarter of FY 2022-23. It is
a fact that, so far company’s performance was erratic. Only in recent times it
started to show improved performance with good profit margins that indicating
changing fortunes of the company due to emerging business potential.
Cosmo EV Video Link HERE
Discl:
Part of data used in the above note are taken from publicly available sources and credit of the same goes to the original owner . Personally holding shares of Cosmo Ferrites , hence views expressed here may be biased , do own due diligence before taking any investment decision.
