Saturday, October 30, 2021

COSMO FERRITES LTD - BENEFICIARY OF CHANGING TRENDS ...




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 magnetsloudspeakers, and small electric motorsFerrites that are used in transformer or electromagnetic cores contain nickelzinc, and/or manganese compounds with low coercivity are called Soft Ferrites or Temporary magnets which activate and work only under and electric field. The low coercivity means the material's magnetization can easily reverse direction without dissipating much energy. Out of these, soft ferrite is more complicated both in terms of manufacturing process and characteristic requirements hence we have limited manufactures in India for this and demand for rest is met by imports.

 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


In latest September quarter, Cosmo Ferrites reported a top line of around Rs.27 Cr, bottom line of Rs.3.51 and an EPS of Rs.3. Considering management’s confidence to enhance capacity by 50%, robust prospects of user industries like Electric Vehicle, Solar Inverters, Energy meters, Battery Chargers, Transformers ..etc it is expected to perform well going forward. At present company exporting its products to more than 50 countries.  Company is a government recognized export house and as a testimony of increasing export opportunities, Cosmo's export turnover reported a robust 48% growth in latest quarter.  I think Cosmo Ferrites is a stock worth keep in our radar which is currently trading around Rs.168, if one is  willing to take high risk for high returns. 

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.


19 comments :

  1. 52 week high is 188 and low is 5.90 rupees. From last 6 months the price is constantly growing. Still scope in increase?

    ReplyDelete
    Replies
    1. Existence of stock market itself is on the belief that if a company's business improve that will ultimately reflect in stock price. What it will be in future is more important than what was its past.

      Delete
  2. Thank you sir. Happy diwali to you and your family . Wish you good luck.

    Jay muscat

    ReplyDelete
  3. Thank you sir,God bless you and your family.wish u all a very happy Diwali.

    ReplyDelete
  4. Thanks sir, after so many days you are rocking back

    ReplyDelete
  5. Warm wishes for Deepavali . Hope you will keep updating the blog whenever convenient and more frequently 😊

    ReplyDelete
  6. Thank you very much. Happy Diwali to you and your family.

    ReplyDelete
  7. Many Thanks Sir and a very Happy Diwali to you too!!!

    ReplyDelete
  8. WisH U & Ur FamilY the Same HappY DiwalI in advance.
    Thank U for recommemndin after long time

    ReplyDelete
  9. Happy Diwali to you and your family.

    ReplyDelete
  10. We are really delighted to see your stock pick with such a indepth details after almost six months gap.
    Wish you n your family very happy deepawali.

    ReplyDelete
  11. Thank you sir, i wish you a happy deepawali to you and your family.

    ReplyDelete
  12. Thank you very much sir. Very good information that we can use. Happy Diwali to you.

    ReplyDelete
  13. Happy Deewali Sir. EKI has become a rocket but they are asking to buy 1200 shares at once. Which cost too much :(

    ReplyDelete
  14. Happy diwali to you and your family

    ReplyDelete
  15. Dear Valuepick sir,

    Thanks very much for unearthing this new investment idea. Could you please take a look at Add Shop Eretail? It is growing exponentially? Happy Dipawali to you and your family.

    ReplyDelete
  16. Thank you, will buy atlest 1000 shares with 5 years lock-in

    ReplyDelete
  17. thank u sir ,tuse great ho
    diwali ki mubarakbad kabul karo
    lov u sir

    ReplyDelete

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