Cosmo First Ltd

NSE:COSMOFIRST

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the investor call of Cosmo First Limited to discuss the Q1 FY '25 results. Today, we have with us from the management, Group CEO, Mr. Pankaj Poddar; and CFO, Mr. Neeraj Jain.

Starting off with the statutory declaration, certain statements in the conference call may be forward looking. These statements are based on management's current expectations and are subject to uncertainties and changes and circumstances. These statements are not the guarantees of future results.

[Operator Instructions] Please note that this conference is being recorded. Now may I request Mr. Neeraj Jain to take us through his opening remarks, subsequent to which we can open the floor for the Q&A. Thank you, and over to you, Neeraj sir.

[Neeraj Jain, executive]

Thank you. Very good afternoon, ladies and gentlemen. I'm Neeraj Jain, Group CFO at Cosmo First, along with my colleague, Mr. Pankaj Poddar, Group CEO at Cosmo First. Our financial results for quarter 1 FY '25 and the investor presentations are available on company's website. We'll first discuss a brief on the performance of the company for the June '24 quarter, which may be followed by questions.

Starting with the financial results. Consolidated sales for the June '24 quarter is INR 690 crores, which is about 5% higher compared to last year June '23 quarters, [indiscernible] largely by the higher volume and better margins. EBITDA for the quarter is INR 84 crores compared to INR 55 crores in June '23 quarters. The improvement in EBITDA is mainly led by higher specialty sales as well as improved domestic BOPP fund margins due to better demand.

The company has released its specialty sales for 69% of total volume in quarter 1 FY '25 as against 64% in FY '24. These specialty margins have also increased in quarter 1 FY '25 due to better sales mix as supply has started again to a specialty export customers for specialty high-margin specialty sales. These are not there in FY '24.

BOPP film margins has been running at INR 19 per kg during June '24 quarter, as against INR 12 per kg in March '24 quarter and INR 11 per kg in June '23 quarters. BOPET business, which was started in September 2022, which is close to 4% of company's consolidated sales for quarter 1, and also earned positive EBITDA for the first time since started the operations. It may be noted that if we circulate the new verticals, means the BOPET vertical, Specialty Chemicals, Petcare and Rigid packaging. In BOPP film EBITDA stands at 13.4% for the quarter 1 as compared to reported EBITDA of 12.2%.

Moving to outlook for the year. The company is expecting improved sales of specialty films as well as domestic margins are expected to remain healthier level at FY '24 -- '25. Cost rationalization on renewable power has started during the mid of the first quarter of FY '25, we expect annual bottom line impact to be close to INR 25 crores from the sale. Another cost rationalization initiative on shifting of Korea plant to India is moving as per plan. Post relocation the production lines should get operational by quarter 3 of FY '25. This will facilitate cost optimization of close to USD 1 million, and improve capacity utilization of the line.

Moving to Specialty Chemicals. The Specialty Chemical has commercialized multiple chemistry, including Adhesives, Coatings and Masterbatches. We should facilitate improvements in EBITDA and better return on capital employed during FY '25. The subsidiary is now -- EBITDA on subsidiaries is now stabilized in mid teens and should deliver more than 25% growth in FY '25.

Moving to packaging growth projects. We started Rigid packaging vertical under brand name Plastech during second half of FY '24, which is related to packaging industry. The buildings vertical is growing well, and with addition of injection molding is working fine for the -- which has started from the quarter 1 of FY '25. Whilst on CPP and BOPP lines are progressing as per plan, we are expecting CPP line to start commercial production by quarter 3 of FY '25. And BOPP line is expected to start commercial production by first half of FY '26.

As indicated in past as well, both the lines will be world's largest production capacity lines and with increased company production capacity by close to 50% in a phased manner. With high-speed large declines, it will rationalize cost of production by 3% to 5% depending on product.

Moving to Petcare vertical Zigly. In Zigly, we are focusing on consolidation during the first 2 quarters of FY '25 before next level of growth. We shall be focused on same store sales growth in the first 2 quarters. Moving to growth and net back position. The company is looking for close to INR 300 crores to INR 350 crores of CapEx in the next 12 months, which is mainly related to BOPP line and some projects to enhance specialty sales. Financial remains strong. The company's net debt is INR 598 crores, which is close to 2x to EBITDA and 0.4x to equity. We expect net debt reduction after FY '25.

With this, I will take a pause. We would like to open the call for questions, please.

[Operator]

[Operator Instructions] The first question is from the line of Abhishek Jain from Arihant Capital Markets.

[Abhishek Jain, analyst]

Congratulations on the good set of results and your future plans. I have 2 questions mainly related to the BOPP margins, contribution margins and the realization for this quarter, the previous quarter and how it has been for July and August.

[Neeraj Jain, executive]

As I've already stated, it's probably working fine. Margins are running probably fine.

[Abhishek Jain, analyst]

The question is for the BOPP and BOPET margins, sir?

[Neeraj Jain, executive]

Both the margins are working fine.

[Abhishek Jain, analyst]

Can I get the number, sir?

[Neeraj Jain, executive]

Post June, actually, it will be difficult to give you specific numbers, but the margins are a little upward direction.

[Abhishek Jain, analyst]

And the realizations?

[Neeraj Jain, executive]

Realizations as well.

[Abhishek Jain, analyst]

Okay. So no specific numbers?

[Neeraj Jain, executive]

The post one it will be difficult, actually.

[Abhishek Jain, analyst]

And before that for the previous quarter?

[Neeraj Jain, executive]

So as we indicated, INR 19 per kg was the BOPP margins during the June quarter. Which is looking a little upward post June. That's all I think can be shared at this moment.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible] Asset Managers.

[Unknown Analyst]

Congratulations on the new numbers. I just wanted to ask, do you have any update on the windows sun films capacity that we were planning?

[Neeraj Jain, executive]

Sorry, could you please repeat your question?

[Unknown Analyst]

Yes. So I just wanted to know if you have any update on the windows sun films capacity that we were planning?

[Neeraj Jain, executive]

Part of the capacity, we expect to start commercial production from the quarter 4 of FY '25. Currently, we are in different stages of trials for the different product categories, which is working fairly well. At the same time, parallelly we are also developing distribution network in India and overseas for the product to be launched. I expect the product to start commercial production by the quarter 4.

[Unknown Analyst]

And sir, [indiscernible] going to be primarily catering for the domestic market and the import substitution side or for the overseas one?

[Neeraj Jain, executive]

So we'll do, of course, both. It will be domestic as well as exports.

[Unknown Analyst]

And sir, as you mentioned in the opening remarks regarding the BOPP capacity coming in for the next fiscal. So can you share any color on the margin impact from the demand-supply scenario or anything on that side?

[Neeraj Jain, executive]

Of course, for the FY '25, as we indicated at the beginning of the call, we feel margins will remain healthier, both for the BOPP more particularly. And our line is expected at the beginning of the next financial year.

[Operator]

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta, analyst]

Yes. So my question is that in this quarter, we have seen this specialty mix improving from 66% to 69%. And you are saying that INR 12 in commodity has increased to INR 19. Sir, despite that, the gross profit, if I look at versus last quarter has only increased by INR 30-odd crores when you are saying that the spread has actually gone up by 50%. So can you just explain, I can't understand how these numbers are happening despite a 50% increase in the commodity margins.

[Neeraj Jain, executive]

So commodity margin, as we said, has increased by INR 7 on an average if you look at in quarter 1 compared to previous quarter. INR 19 versus the INR 12 as was indicated. Based on company's current volume of commodity part of the business, I think INR 30 crore increase in the gross margin is largely due to specialty increase and commodity margin increase is fully justified.

[Sarvesh Gupta, analyst]

Okay. Okay. And second, sir, this INR 19, is it the exit sort of a run rate? Or is it the average that you have achieved during the previous quarter? And what would be your exit sort of, let's say, in the month of June, what was that number?

[Neeraj Jain, executive]

This is average of course. Well, in terms of the exit, we see this largely from the value-add perspective. So quarter 1 average value add on a base commodity sales was running close to INR 32, which was closer to INR 35, INR 36 at the exit point.

[Sarvesh Gupta, analyst]

Understood, sir. And regarding, sir, your other lines of business now more or less, they are all sort of subscale. So any business which can provide you some sort of a reasonable EBITDA in this year itself amongst the Specialty Chemicals or the Rigid packaging or what is their target for this year?

[Neeraj Jain, executive]

Besides the film business of course the Specialty Chemical is making already decent EBITDA. Other businesses are also growing. We will appreciate that most of these businesses we launched very recently. So maybe some time, we expect all the businesses to make money. So Specialty Chemical is already making money in mid-teens EBITDA level. Other than the Rigid packaging by the end of the FY '25, we expect to start a new one.

[Operator]

[Operator Instructions] The next question is from the line of Aditya Rathi from Aequitas Investment.

[Aditya Rathi, analyst]

Congratulations, sir, for good sets of number. Sir, I wanted to gauge more understanding about the Korea shifting that we are doing, which you said that we'll start by Q3 of the current financial year.

[Neeraj Jain, executive]

So that one line actually thermal film line actually, which we are running at the Korea. We moved that line to India operations more so for the core specialization. But besides this, we thought we would be able to better optimize the utilization of this line, if you run it from the India. So this we already relocated. In quarter 2, we expect various trials to be completed. And from quarter 3, we expect commercial production to start for this line.

[Aditya Rathi, analyst]

Sir, any outlook on the top line and bottom line from this?

[Neeraj Jain, executive]

So this is a moving value add line, actually, as I said, it's thermal fully production line which do value add on the plain vanilla BOPP thing. So from that perspective, the top line may increase only because it's a specialty product compared to the commodity product. But not very significantly because the volume of this line is expected to be between 6,000 to 7,000 metric tonnes annual.

[Operator]

The next question is from the line of [ Mukesh Anchani ] from WC Securities.

[Unknown Analyst]

Sir, I want to know that in the last quarter, did we get the benefit of BOPP price increase in the entire quarter or for a month or so?

[Neeraj Jain, executive]

So BOPP price was increasing during previous quarter inflated each month. Average as we indicated, gross margin of INR 19 compared to INR 12 in this quarter.

[Unknown Analyst]

Okay. Okay. And sir, how much increase in profit is like contributed by increase in Specialty Films ratio? And how much it would be contributed by BOPP price increase?

[Neeraj Jain, executive]

Well, it will make it difficult to quantify on the call, but very broadly, I can indicate a large part of this is because of the specialty increase. And this could be 60-40 ratio, but at a very ballpark number. So it's difficult to quantify...

[Unknown Analyst]

Got it. Got it. And how do we see the ratio of specialty films in this current year going ahead?

[Neeraj Jain, executive]

Specialty film is working fairly fine. So the increased momentum continues and rather should be more progressive in the quarter 2.

[Operator]

The next question is from the line of [ Bhavesh Chauhan ] on from [indiscernible].

[Unknown Analyst]

Sir, in terms of specialty, what is the contribution that we see by the end of FY '25 and FY '26 if I may ask?

[Neeraj Jain, executive]

In quarter 1, we already reached in volume term at 69%. We expect this to further increase in the coming quarters. There are a lot of product categories where we are working. A lot of new products also we are expecting to be launched in the coming quarters. So we are optimist [indiscernible] increase in the specialty...

[Unknown Analyst]

And for Zigly, sir, we are looking to consolidate [indiscernible] kind of looking at making it profitable for [indiscernible] time to come.

[Neeraj Jain, executive]

If you repeat your question, please?

[Unknown Analyst]

For Zigly, when can say we expect it to become profitable in terms of, let's say, EBITDA level breakeven and then profitable?

[Neeraj Jain, executive]

Zigly, the nature of business is currently at this growth phase so it's very difficult to quantify by what time it will become profitable. Each quarter, we are progressing in line with the plan. So as we said, in the first 2 quarters of current financial year, we'll focus more on the consolidation in Zigly, a little more on the cost optimization and some store sales growth. And post that in the second half of the financial year, we will look at the next level of the growth. So as of now, a little difficult to quantify by what time it will be profitable, but we are progressing day by day in that direction.

[Operator]

The next question is from the line of Ayush Vimal from Clearview Capital.

[Ayush Vimal, analyst]

Sir, is the increase in realization in BOPP and India phenomena? Or is it something that's happening across the globe?

[Neeraj Jain, executive]

So it's actually a globe in fact. So India, of course, maybe a little higher compared to a global average. But yes, increased demand we witnessed in exports as well not only in India.

[Ayush Vimal, analyst]

Okay. And sir, is there a possibility that some of your customers start importing BOPP instead of purchasing from you? Given the fact that India prices have increased much more significantly compared to what's happened globally?

[Neeraj Jain, executive]

No. Actually, if you look into the history of import happening in India, even at the peak level of margins also that has been very insignificant, maybe 1% or so. And then the basic reason behind this. I mean we -- unlike many other industries where you get the advantage of high-volume production, low cost of production. We will not do industry where the cost of production differ much whether you get make in India or China or other part of the world. So and history also suggested the import has been [indiscernible]. So we do not see frankly import will start in India. On the top of it, there is a 10% import duty as well on import of any kind of flexing packaging in India.

[Ayush Vimal, analyst]

Got it. And sir, my final question is, historically, the increase in spreads -- increase and decrease in spread has been more driven by supply than by demand. So we just wanted to understand what has changed this time around because of which the demand has surged significantly resulting in an increase in realization and spread. Has there been a new use case for the product, which wasn't there before?

[Neeraj Jain, executive]

I think I would say it's more a function of both demand and supply, not only on the supply side. So there are quarters when the demand levels are high. So of course, this quarter has been one. And we expect this momentum to continue in current financial year. But I would say it's more about demand and supply.

Unfortunately, for flexible packaging, demand side has been growing year-on-year close to 10% if you look at the last 2 decades history. This industry grows, although a large part of the industry supplies to FMC, but this industry for flexible packaging grows better than the growth of the FMCG because lot many applications are getting moved to flexible packaging from the other home -- packaging. So that way, we feel demand should continue to grow. On the supply, of course, it's more to do with the timing if the supply comes in the very, very short time at each other. There will be 1 or 2 quarters margin pressure. But ultimately, with the growth of the demand, it optimizes.

[Operator]

The next question is from the line of Rohan from Turtle Capital.

[Unknown Analyst]

So I just wanted to know that the momentum that we have been witnessing since last 2 quarters in BOPP, do you expect this to continue from here on?

[Neeraj Jain, executive]

Yes. So as we said at the beginning of the call, yes, for the FY '25, we expect this momentum to continue. For Specialty, we expect this uptick to a little increase and BOPP margin momentum we actually expect to continue.

[Unknown Analyst]

Okay. And can you give us more idea regarding how the things are working in the BOPET because you are a little bit having a negative that it's not journey will be difficult for like [indiscernible] or has anything changed in BOPET?

[Neeraj Jain, executive]

So just demand level has increased. So if you recall, there has been a lot of capacity addition on the BOPET side in FY '23 and '24. We would be looking increase in the demand level, the gap is getting partially reduced, it still -- the gap is not fully breached but a little increase in the demand level is helping the -- to optimize the margins. And that's why probably for the third quarter, we also earned positive EBITDA on the BOPET line.

[Unknown Analyst]

Yes. And do you think that going onward, it will be better than what it was previously for us? Or do you think it will sustain?

[Neeraj Jain, executive]

So from [indiscernible] logic, yes, the answer is yes because demand is increasing. There is no substantial capacity addition, we expect in FY '25 so that was just from logic perspective, it should increase.

[Operator]

The next question is from the line of Jatin from [indiscernible] Investment.

[Jatin Damania, analyst]

I just wanted to understand because in the last conference during the mid-May, we were indicating that margins are likely to remain soft when we compare to the last quarter and BOPET was still continue to make losses. But however, scenario has changed starting June, which was in the last month itself. So what could be the reason that has driven such an improvement in the spreads in both the segments, BOPP and BOPET?

[Neeraj Jain, executive]

Yes. multiple things have happened. One is that this year, the summer was very harsh. So the consumption of soap, shampoo, grains have gone up significantly. Also, there was election season, and that has also changed. What we've also seen is Europe and America has started to recover, and therefore, the exporting mineral has gone up from the country.

[Jatin Damania, analyst]

So if you want to look into demand supply in the domestic market. So can you help us what was the situation last year? And how is the demand supply panning out right now?

[Neeraj Jain, executive]

So as far as BOPP is confirmed, it's fairly balanced. When it comes to polyester, we still see some excess and that is the reason that polyester margins are still not at the desired level. But the good thing is that largely at EBITDA level, polyester was making losses while in the last quarter, there is a marginal EBITDA that we have earned. What we see is that in the quarters to come, the EBITDA margins on polyester will go up. however, what you need to understand is we have done sizable investment of INR 400 crores in polyester and we need to earn a minimum INR 100 crores of cash to recover that investment. But this has not reached to that level.

So obviously, polyester will take some time, but it's a matter of time before even polyester starts making money. The other thing is that we're continually shifting our polyester volumes also to specialty. And we've already reached our own rate of close to 500 tonnes per month. So roughly 20% of our capacities have been now locked into specialty. As we keep moving along and we have come out with 2 very innovative things. We cannot share too much details on the call at this stage. Once we start scaling up, polyester irrespective of the market conditions in the next couple of years, will start making quite decent money, just like BOPP also, we make only tough market.

[Jatin Damania, analyst]

So probably one can look at it's a matter of 3 to 6 months or probably another 9 months where -- I mean the polyester will also start making equal money or more money than BOPP right now, right?

[Neeraj Jain, executive]

I would not like to compare it like this, but for sure, BOPET better days are yet to come. And after this right now, only 2 lines are coming up only in FY '27. So actually for next 2, 3 years, there is hardly any capacity coming up, and our demand will continue to grow, and therefore, BOPET will see better days.

[Jatin Damania, analyst]

Okay, sir. And sir, now when you are saying that we will be moving into a value-added products, and we have developed a couple of more products and even [ SCF ] likely to come in Q4 FY '25. But till the time, [ SCF ] comes on the commercial production, the run rate that we had mentioned and even Mr. Pankaj Poddar had indicated on the news channel that the 2Q number seems to be look more promising given the improvement in the spread. So is it fair to assume that the INR 19 kg that we have done in BOPP in 1Q, the second quarter and the third quarter, the numbers will be upwards of INR 25, INR 26 a kg?

[Neeraj Jain, executive]

I wish I'm god.

[Jatin Damania, analyst]

I mean basis the indication if there's an improvement in the profitability, and there was a TV interview of Mr. Poddar that's indicating that the Q2 will be much better in terms of the Q1 forthcoming quarter.

[Neeraj Jain, executive]

It's going up. There's no doubt about that.

[Operator]

The next question is from the line of Aditya Rathi from Aequitas Investments.

[Aditya Rathi, analyst]

My questions have been answered.

[Operator]

The next question is from the line of Navneet Bhaiya an individual investor.

[Unknown Attendee]

Congrats for the good set of numbers. My question is on Zigly. So I saw your interview Pankaj, where you mentioned that you're looking to consolidate your operations in Zigly. When I look at your segmental performance on a quarter-on-quarter basis, the turnover seems to have declined from about INR 8.5 crores to INR 6 crores. So I just wanted to understand how do we see that going forward?

[Neeraj Jain, executive]

See the turnover has not declined as much as perhaps you are saying, but it has totally declined. The decline has happened because earlier online, we were more aggressive specifically on marketplace, and we realize that's not helping us. So we have kind of cut down. The good news is that the retail is going up month-on-month, and online also, we are looking at more logically to try and send only profitable products.

So the losses per month has come down by close to INR 1.25 crores, while there's a marginal different sales and that too, we feel that in a month or so or 2 months, we should be able to largely recover on the sales part because now all the segments are going fairly well. Second good thing is that now the marketplace is making money for us. And retail, if we are able to continue growing from here, it's a matter of time where retail will also make money. In fact, services are already -- even if you allocate proper cost to it. We are almost close to breakeven when it comes to giving services at the retail. The only area which is right now still have to be turned profitable is one is product sale at the retail side and our own website. On the website, also, we're going to come out with a new version of the website by December time frame. And we have come out with some very innovative ideas in terms of how we can keep the customers tuned to our website. I cannot share too many details at this stage.

But what will come out will be very innovative. And the other thing is that we are now launching a lot of private labels and signature range, where the margins are much better and these products are really loved by the customer. In fact, I have personally recorded 1 podcast which is there on LinkedIn and YouTube and stuff, you may like to see my recent podcast, which will give you a lot of clarity in terms of what we are doing.

[Aditya Rathi, analyst]

Okay. I appreciate that. I will definitely have a look. So what's your GMV for the last quarter in Zigly?

[Neeraj Jain, executive]

It's close to INR 4 Cr. Quarter 1 it will be slightly lower. June runway it is close to INR 4 Cr. I think quarter-wise because April, May, we had a quite dip on the marketplace sales. So at a quarter level, we may be at 3.5 perhaps.

[Aditya Rathi, analyst]

Okay. So about INR 10-odd crores for the quarter?

[Neeraj Jain, executive]

Yes.

[Aditya Rathi, analyst]

10 to 11. Okay. And as regards to your comments on the losses being controlled. Again, in your segmental results, we have lost about INR 10-odd crores, INR 10.3 crores to be precise in your Others vertical where I presume that would be housed. It was a similar number in the last quarter. So is there something else in this as well? Or how do we see this going forward, the minus INR 10 crores number that's there in your segmental results?

[Neeraj Jain, executive]

So Others include besides Zigly as well like the Rigid packaging. And that, we will not be able to correct the numbers.

[Aditya Rathi, analyst]

Okay. So these new verticals that we have launched Rigid packaging and others, they would currently be on a ramp-up phase and hence there are losses? Am I understanding that correctly then?

[Neeraj Jain, executive]

Exactly, but the good news is that the Rigid packaging is also growing close to 10% month-over-month. We did -- June month, we did INR 3 crores, like we have already done more than 10% growth. And August, again, we are looking at a good healthy growth. So Rigid business is growing. Zigly also we have done a lot of structural correction. And as we had mentioned earlier, that chemicals also this year, we are expecting a double-digit numbers, EBITDA numbers and chemical business.

[Aditya Rathi, analyst]

Chemical improvement is quite visible. It's quite visible. I think you did INR 45-odd crores this quarter versus INR 25 crores the previous year. And of course, you had a 15-odd percent EBIT margin. The other segment, it appeared as if your turnover is declining quarter-on-quarter, whereas the losses are remaining same. So I was just trying to match that with your commentary on trying to consolidate the Zigly as well as growing the Rigid packaging. When do we see that appearing in your other segmental information?

[Neeraj Jain, executive]

So we are hoping that the Rigid packaging should be kind of breakeven by the end of this year. We should [indiscernible] there to be breakeven. Zigly is going to take some more time and especially until the time you keep investing in more stores, it may not be that easily profitable unless you kind of take a little pause to the growth of the business, then only you start seeing profitability, which is I think still at least a couple of years away, if not more.

But good thing is that Zigly is moving very well and what we feel is that even if we touch INR 100 crores of net revenue, our losses would not be that high. So I mean we are running it very, very logically and rational manner rather than just try to burn money and take sales. Focus is to build the brand. That is and in a rational manner.

[Operator]

The next question is from the line of Nishant Shah from Emkay Global.

[Nishant Shah, analyst]

My basic question, sir, what will be the CapEx number for the coming 2 years?

[Neeraj Jain, executive]

Roughly INR 300 crores for this year and close to INR 150 crores for next year.

[Nishant Shah, analyst]

This includes the maintenance CapEx?

[Neeraj Jain, executive]

Yes, this includes everything.

[Nishant Shah, analyst]

Okay. And what will be the debt number if debt is taken?

[Neeraj Jain, executive]

Yes. So right now, we are operating at a 2.1 debt-to-EBITDA ratio. The total debt is close to INR 500 Cr and we do not expect any significant change in the debt in the current year. And the next year, the debt should actually come down. To be more precise it's actually INR 598 crores so closer to INR 600 crores, and we expect that in spite of CapEx, this number should not change much. And next year, given that our CapEx is lower, this debt would come down next year.

[Nishant Shah, analyst]

So any plans to -- any target for debt reduction?

[Neeraj Jain, executive]

Yes, it will happen next year. That's what I said.

[Nishant Shah, analyst]

Okay. And are there plans for any demerger or sometime?

[Neeraj Jain, executive]

Nothing on the cards for this year.

[Operator]

The next question is from the line of Sai Ganesh from Square 64 Capital Advisors.

[Sai Ganesh, analyst]

I just want to understand the part of gross margin of INR 19 per kg. And it was possible because of the low inventory, which we had in the Q4. And it is sustainable for the Q2 FY '25 in the range of 17% to 21% gross margins?

[Neeraj Jain, executive]

Yes. Right now, things are looking quite well, and we do not see any risk to this.

[Sai Ganesh, analyst]

And so in your top line growth it is just a 5% growth. It maybe probably be to the realization route. Is there any supply constant in our capacity utilization levels or packaging?

[Neeraj Jain, executive]

Yes. On the polyester line, we are not fully utilized. And CPP line also, there is a potential for us to grow. So there are ideal capacity in those areas. Rest of the areas we are fully utilized.

[Sai Ganesh, analyst]

Okay, sir. And sir, on the Specialty Chemicals part, what is the utilization level for current quarter?

[Neeraj Jain, executive]

I think every asset is fully utilized, we can close to increase our sales by 60%, 70%. But that's because we have mastered that coatings and adhesives and these different assets are operating at different levels. But broadly, if everything has to be fully utilized, we can grow the sales to close to INR 300 crores. But we might invest in one of these depending on which grows better and which makes more money. There may be some small CapEx that will be planned end of this year or next year, but it would not be very sizable. It is going to be a small CapEx.

[Operator]

The next question is from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta, analyst]

Sir, just a follow-up on one of the comments that you made. So I think if you look at FMCG demand in India, et cetera, it has been pretty rooted anyways. And that same situation was sort of persisting in Q4 also. So one of the reasons you said that the spreads have increased and realizations have increased is because of the demand because obviously, nothing major has changed on the supply side as far as for BOPP as well as BOPET. So what specifically has happened in terms of demand because FMCG industry seems to be in a very low volume growth sort of a scenario? So why is that demand spurt happening in terms of flexible packaging?

[Neeraj Jain, executive]

See, first of all, we are not into just flexible packaging, packaging is only 1/3 of our total sales. We supply in many of the segments where also there's a lot of growth. Second thing is the numbers that you see in newspaper is mainly represented for larger companies. What we are not realizing is that a lot of small start-ups are also producing several juices and drains and personal care and health care and so on and so forth. It does not get captured in the FMCG growth. So what is really happening is that most of this new group is actually taken by new players which somehow is getting within the calculation. The third thing, as we said earlier, is that the exports also is doing very well.

[Sarvesh Gupta, analyst]

Okay. And since you mentioned, your BOPP spreads for the last quarter as well as this quarter as well as you mentioned that they are probably INR 2 crore, INR 3 higher for the company. So how has the BOPET spreads been if you can allude to those numbers as well?

[Neeraj Jain, executive]

So the BOPET was making EBITDA losses last year. In fact, from the time that we package this line last quarter is the first quarter when we have made EBITDA positive. And in the coming quarters, we expect that polyester margin as the demand gets better and the mismatch goes lower, we expect that even polyester margins should improve from here.

[Sarvesh Gupta, analyst]

But can you mention the numbers for the spread in gross margin terms, not EBITDA? It's been changing month-over-month. It's very difficult to give 1 number. I mean, we are actually looking at month-on-month and last quarter, a line was also highly underutilized. I think polyester performance should be seen more closely in this quarter once the results are out because last quarter, our line was hardly, I would say, 40% utilized, and there was 50% underutilization on the line as such.

[Operator]

The next question is from the line of Abhishek Jain from Arihant Capital Markets.

[Abhishek Jain, analyst]

My follow-up question was answered.

[Operator]

The next question is from the line of Jatin Damania from [indiscernible] Investments.

[Jatin Damania, analyst]

So just one clarification. Sir now when you indicated that your SCF is likely to come out in Q4 of FY '25. So I mean just a ballpark number, can you help us in understanding the company's estimates are probably working in terms of the revenue contribution one can expect from SCF and how the ramp-up would be?

[Neeraj Jain, executive]

Could you please repeat your question?

[Jatin Damania, analyst]

You indicate your sun control films to come into commercial in Q4 FY '25. So I just wanted to understand the capacity of the sun control films and how the ramp-up would be and contribution to our overall revenue, which management is expecting in FY '26?

[Neeraj Jain, executive]

See, on this year FY '25, what we said, CPP's new lines should get commissioned, estimated commissions in quarter 3. And post that some part may come in the quarter 4. So while there will be increase in the top line more so in volume terms compared to previous quarters, this may be -- that is difficult because near line initial months are a little difficult to project with what utilization it will run. But very broadly, it may be higher single digit number volume growth next year.

[Jatin Damania, analyst]

So our CPP line is almost to the tune of 10,000, right?

[Neeraj Jain, executive]

CPP lines should produce close to 18,000 metric tonnes at full utilization.

[Jatin Damania, analyst]

And this entire 18,000 will be SCF? Can one assume that? Entire 18,000 will be your sun control films?

[Neeraj Jain, executive]

Past [indiscernible]. It has nothing to do with sun films. And when the volume start from next year and sun film capacity utilization will take at least a couple of years from the commercialization of the line.

[Jatin Damania, analyst]

Okay. So major concern -- FY '26 also won't we see any major benefit of the sun control films?

[Neeraj Jain, executive]

Yes. I feel that profitability will come in window film only from FY '27.

[Jatin Damania, analyst]

And sir, one last bookkeeping question. Can you help us in understanding the volume of BOPP and BOPET in current quarter Q1?

[Neeraj Jain, executive]

We do not share the volumes over these quarters.

[Operator]

[Operator Instructions] If there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.

[Neeraj Jain, executive]

Sure. To sunrise, I think company is expecting improved sales of Specialty sales during FY '25. Also, we expect domestic BOPP margins to remain at healthier level during the year. Among new business verticals, Specialty Chemical is already making decent EBITDA. Other verticals, whether it is capacitor metallizer, rigid packaging are expected to earn EBITDA by the end of the FY '25. While Zigly will take some time to become profitable, however should be a significant value creator.

In the last, I would like to indicate the statutory declaration. Certain statements in this con call may be forward-looking statements. These statements are based on management's current expectations, and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results. Many thanks for joining.

[Operator]

Thank you very much. On behalf of Cosmo First Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.