ThinkStock PhotosAxis Securities has given buy rating to CCL Products India with a target price of Rs 283. The share price moved down by 0.23 per cent from its previous close of Rs 280. The stock’s last traded price is Rs 279.35.
CCL Products India Ltd., incorporated in the year 1961, is a Mid Cap company (having a market cap of Rs 3658.27 Crore) operating in Tea / Coffee sector.
Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 289.21 Crore, up 9.31 % from last quarter Sales of Rs 264.58 Crore and up 5.87 % from last year same quarter Sales of Rs 273.17 Crore. The Company reported net profit after tax of Rs 38.48 Crore in latest quarter.
Investment Rationale
Margin expansion driven by superior product mix: CCLP’s EBITDA Margins at 25% in FY20 were the highest reported margins over the last 5 years. Key drivers for margins expansion were 1) rising contribution from higher margin freeze dried coffee (FDC), 2) small packs gaining traction .With the ramp up in capacity utilization of FDC unit (~50% in FY20) and commissioning of agglomeration and packing capacity by FY22E we believe there is further scope for margin expansion going forward.
Volume growth led by strong order book: With rise in in-home consumption of instant coffee across the globe due to lockdown caused by the pandemic, CCLP is tracking a healthy order book especially from USA and EU (~40-45% of revenue). This is backed by client addition in US and surge in demand from supermarkets in EU. Vietnam unit which has been catering to the US client continues to operate at high utilization levels despite some spurt in COVID-19 cases in the country, further its planned capacity addition of 3,500 tonnes is on track and expected to commission by Q3FY21 indicating healthy volume growth going ahead.
FY21 guidance strong despite COVID uncertainty : Company has guided for a double digit volume growth in FY21 aided by superior product mix and improving utilization levels. The brokerage believes CCLP is well placed to recoup it lost volumes in H2FY21 led by client addition and rising trend of in-home coffee consumption aided by peak coffee season in H2. In the domestic business also CCLP targets to Rs. 120-130cr revenues in FY21 as against earlier estimate of Rs. 100cr led by increased offtakes. However capping of MEIS benefits upto Rs. 2 Cr could be a key near term risk to our earnings estimates, but it believes that the Government would come up with an alternative scheme to incentivize exports and thereby not hurt the export growth opportunity in the current market conditions.
Promoter/FII Holdings
Promoters held 45.84 per cent stake in the company as of March 31, 2020, while FIIs held 15.80 per cent, DIIs 10.96 and public and others 27.41 per cent.
CCL Products India Ltd., incorporated in the year 1961, is a Mid Cap company (having a market cap of Rs 3658.27 Crore) operating in Tea / Coffee sector.
Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 289.21 Crore, up 9.31 % from last quarter Sales of Rs 264.58 Crore and up 5.87 % from last year same quarter Sales of Rs 273.17 Crore. The Company reported net profit after tax of Rs 38.48 Crore in latest quarter.
Investment Rationale
Margin expansion driven by superior product mix: CCLP’s EBITDA Margins at 25% in FY20 were the highest reported margins over the last 5 years. Key drivers for margins expansion were 1) rising contribution from higher margin freeze dried coffee (FDC), 2) small packs gaining traction .With the ramp up in capacity utilization of FDC unit (~50% in FY20) and commissioning of agglomeration and packing capacity by FY22E we believe there is further scope for margin expansion going forward.
Volume growth led by strong order book: With rise in in-home consumption of instant coffee across the globe due to lockdown caused by the pandemic, CCLP is tracking a healthy order book especially from USA and EU (~40-45% of revenue). This is backed by client addition in US and surge in demand from supermarkets in EU. Vietnam unit which has been catering to the US client continues to operate at high utilization levels despite some spurt in COVID-19 cases in the country, further its planned capacity addition of 3,500 tonnes is on track and expected to commission by Q3FY21 indicating healthy volume growth going ahead.
FY21 guidance strong despite COVID uncertainty : Company has guided for a double digit volume growth in FY21 aided by superior product mix and improving utilization levels. The brokerage believes CCLP is well placed to recoup it lost volumes in H2FY21 led by client addition and rising trend of in-home coffee consumption aided by peak coffee season in H2. In the domestic business also CCLP targets to Rs. 120-130cr revenues in FY21 as against earlier estimate of Rs. 100cr led by increased offtakes. However capping of MEIS benefits upto Rs. 2 Cr could be a key near term risk to our earnings estimates, but it believes that the Government would come up with an alternative scheme to incentivize exports and thereby not hurt the export growth opportunity in the current market conditions.
Promoter/FII Holdings
Promoters held 45.84 per cent stake in the company as of March 31, 2020, while FIIs held 15.80 per cent, DIIs 10.96 and public and others 27.41 per cent.
