Institutional Equities

CCL Products (India)

21 February, 2023

Reuters: CCLP.NS; Bloomberg: CCLP IN

Strong demand outlook; capacity expansion on track BUY
We recently interacted with the management of CCL Products (India) Ltd (CCLP) in Sector: Beverages
order to get updates on demand outlook, commissioning of new capacities, order
visibility and B2C operations. Following are the KTAs from the interaction. We CMP: Rs543
believe that underlying demand for Spray Dried (SD) coffee continues to be strong Target Price: Rs650
Management Meet Update

across geographies and CCLP is in a position to clock 60,000 tonnes volume by

FY26-end, which should translate into ~Rs7.2bn EBITDA, implying a 4-year CAGR of Upside: 20%
~22%. Earnings CAGR over the same period could be ~25% on account of lower Abhishek Navalgund
ETR. CCLP continues to be our top idea and we maintain BUY on it with an Research Analyst
unchanged target price (TP) of Rs650. [email protected]
 The management believes that coffee demand has witnessed a surge post Covid-19, +91-22-6273-8089
wherein newer geographies are opening up while demand from developed countries
remains in low single digit. CCLP is gaining market share in the developed countries
Key Data
by replacing other processors and also by expanding its portfolio. As a part of their
strategy of territorial de-risking, customers want to diversify their supplies. The Current Shares O/S (mn) 133.0
management indicated that customers are considering CCLP as the first preference Mkt Cap (Rsbn/US$mn) 71.7/865.9
because of its capacity addition plans, consistent track record and manufacturing 52 Wk H / L (Rs) 579/315
operations in both India as well as Vietnam. Hence, select customers are willing to sign Daily Vol. (3M NSE Avg.) 219,716
multi-year contracts as well.
 Due to capacity constraints in India, CCLP has been actively outsourcing plain vanilla Price Performance (%)
blends for select clients. The management informed that out of the >1,000 blends,
1M 6M 1 Yr
~45% should be generic in nature. Demand from the domestic business remains
strong. EBITDA/kg from the blends getting outsourced is broadly similar to the overall CCL Products 1.3 29.1 17.4
India spray dried margin. Nifty Index (1.1) 0.4 3.6
 The management indicated very strong volume growth in 4QFY23 on account of Source: Bloomberg
additional capacity coming on stream in Vietnam and overall positive outlook across
key geographies. Supplies from the incremental Vietnam capacity have begun from
Jan’23. The management expects ~50% utilization from the same in FY24, which in
turn implies ~15% overall volume growth in FY24 keeping everything constant.
 The entire freeze dried capacity is booked till FY24. Since Vietnam FD capacity is
expected to be commissioned by the end of 3QFY25, growth in the next two years
should be largely driven by spray-dried coffee.
 While the management reiterated that EBITDA/kg to remain constant for the next two
years, internal efficiencies and higher share of small packs volume should support mix
improvement. Small packs volume share is ~20%, wherein the major markets are Africa
and USA.
 In terms of business with retail chains in Europe, the management indicated that CCLP
has added two more (earlier six) big retail chains over the last six months.
 On the B2C business, the management reiterated its plans to double revenue in the
next three years. CCLP is looking to further penetrate in South India and expand its
distribution reach in North India, especially in premium outlets. The B2C business
achieved operational break-even in FY22. CCLP announced its foray into plant-based
meat business, which is a niche category, but it is witnessing a lot of traction. CCLP
has expanded its presence from three towns to six towns, wherein Delhi, Chennai and
Mumbai were added. The company is on the verge of adding Bengaluru as the 7th town
for plant-based meat business. The management indicated that CCLP is also
assessing a few more categories, which need not be coffee adjacencies.

Please refer to the disclaimer towards the end of the document.

 Institutional Equities
Exhibit 1: Financial summary
Particulars (Rsm) FY21 FY22 FY23E FY24E FY25E
Net Sales 12,425 14,620 21,015 25,606 31,905
Growth YoY% 9.1 17.7 43.7 21.8 24.6
Gross margin % 52.5 50.6 49.9 49.7 50.3
EBITDA 2,978 3,311 4,059 4,960 6,291
EBITDA margin % 24.0 22.6 19.3 19.4 19.7
Adj PAT 1,823 2,044 2,636 3,471 4,437
Growth YoY% 9.8 12.1 29.0 31.7 27.9
Adj EPS 13.7 15.4 19.8 26.1 33.4
RoCE 17.2 16.2 16.4 16.6 17.6
RoE 18.1 17.5 19.6 22.3 24.2
P/E 39.6 35.4 27.4 20.8 16.3
EV/EBITDA 25.5 23.3 19.4 16.1 12.9
P/BV 6.6 5.8 5.0 4.3 3.6
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 2: Change in earnings estimates

Old Estimates New estimates Change (%)
Consolidated (Rsmn)
FY23E FY24E FY25E FY23E FY24E FY25E FY23E FY24E FY25E
Revenue 21,015 25,606 31,905 21,015 25,606 31,905 - - -
EBITDA 4,059 4,960 6,291 4,059 4,960 6,291 - - -
EBITDA margin % 19.3% 19.4% 19.7% 19.3% 19.4% 19.7% - - -
APAT 2,636 3,471 4,437 2,636 3,471 4,437 - - -
Source: Nirmal Bang Institutional Equities Research

Exhibit 3: 1-year forward PE trend Exhibit 4: 1-year forward EV/EBITDA trend

Source: Bloomberg, Nirmal Bang Institutional Equities Research Source: Bloomberg, Nirmal Bang Institutional Equities Research

2 CCL Products (India)

 Institutional Equities
Financials (Consolidated)
Exhibit 5: Income statement Exhibit 6: Cash flow
Y/E March (Rsm) FY21 FY22 FY23E FY24E FY25E Y/E March (Rsm) FY21 FY22 FY23E FY24E FY25E
Net Sales 12,425 14,620 21,015 25,606 31,905 PBT 2,348 2,613 3,069 3,945 5,075
Growth YoY% 9.1 17.7 43.7 21.8 24.6 Depreciation 494 575 839 966 1,216
COGS 5,902 7,229 10,532 12,879 15,853 Interest - - 201 226 236
Gross margin % 52.5 50.6 49.9 49.7 50.3 Other adjustments 41 270 -50 -178 -235
Staff costs 795 977 1,367 1,601 1,914 Change in Working capital -915 -2,061 -1,745 -1,209 -2,210
Other expenses 2,750 3,104 5,058 6,166 7,846 Tax paid -259 -390 -433 -474 -637
EBITDA 2,978 3,311 4,059 4,960 6,291 Operating cash flow 1,709 1,007 1,881 3,276 3,444
Growth YoY% 4.2 11.2 22.6 22.2 26.8 Capex -1,546 -1,899 -2,550 -3,850 -4,000
EBITDA margin % 24.0 22.6 19.3 19.4 19.7 Free cash flow 163 -892 -669 -574 -556
Depreciation 494 575 839 966 1,216 Other investing activities 19 - 122 236 282
EBIT 2,483 2,736 3,220 3,994 5,075 Investing cash flow -1,527 -1,899 -2,428 -3,614 -3,718
Interest 170 164 201 226 236 Issuance of share capital - - - - -
Other income 34 41 50 178 235 Movement of Debt 902 916 1,229 3,362 600
PBT (bei) 2,348 2,613 3,069 3,945 5,075 Dividend paid (incl DDT) -266 -665 -791 -1,041 -1,331
PBT 2,348 2,613 3,069 3,945 5,075 Other financing activities - - -201 160 345
ETR 22.4 21.8 14.1 12.0 12.6 Financing cash flow 636 251 238 2,481 -386
PAT 1,823 2,044 2,636 3,471 4,437 Net change in cash flow 818 -641 -309 2,143 -660
Adj PAT 1,823 2,044 2,636 3,471 4,437 Opening C&CE 387 1,204 563 254 2,397
Growth YoY% 9.8 12.1 29.0 31.7 27.9 Closing C&CE 1,204 563 254 2,397 1,737
Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 7: Balance sheet Exhibit 8: Key ratios

Y/E March (Rsm) FY21 FY22 FY23E FY24E FY25E Y/E March (Rsm) FY21 FY22 FY23E FY24E FY25E
Share capital 266 266 266 266 266 Per share (Rs)
Reserves 10,607 12,241 14,086 16,516 19,622 Adj EPS 13.7 15.4 19.8 26.1 33.4
Net worth 10,873 12,507 14,352 16,782 19,888 Book value 81.7 94.0 107.9 126.2 149.5
Long term debt 1,769 1,117 2,040 4,500 4,500 DPS 4.0 5.0 5.9 7.8 10.0
Short term debt 2,977 4,492 4,798 5,700 6,300 Valuation (x)
Total debt 4,746 5,609 6,838 10,200 10,800 P/Sales 5.8 4.9 3.4 2.8 2.3
Other non-current liabilities 553 774 774 1,161 1,742 EV/sales 6.1 5.3 3.8 3.1 2.5
Total Equity & Liabilities 16,172 18,890 21,965 28,143 32,430 EV/EBITDA 25.5 23.3 19.4 16.1 12.9
Gross block 9,962 11,461 15,411 19,411 23,411 P/E 39.6 35.4 27.4 20.8 16.3
Accumulated depreciation 1,978 2,638 3,477 4,443 5,659 P/BV 6.6 5.8 5.0 4.3 3.6
Net Block 7,984 8,822 11,934 14,968 17,752 Return ratios (%)
CWIP 1,489 1,600 200 50 50 RoCE 17.2 16.2 16.4 16.6 17.6
Intangible and others - - - - - RoE 18.1 17.5 19.6 22.3 24.2
Other non-current assets 498 364 291 233 186 Profitability ratios (%)
Investments 0 0 - - - Gross margin 52.5 50.6 49.9 49.7 50.3
Trade receivables 2,986 3,196 5,379 5,992 6,866 EBITDA margin 24.0 22.6 19.3 19.4 19.7
Inventories 3,197 5,191 4,668 5,244 6,651 PAT margin 14.6 13.9 12.5 13.5 13.8
Cash & Cash equivalents 1,204 563 254 2,397 1,737 Liquidity ratios (%)
Other current assets 525 963 867 780 702 Current ratio 1.7 1.6 1.7 2.0 2.0
Total current assets 7,911 9,913 11,167 14,413 15,956 Quick ratio 1.0 0.7 1.0 1.3 1.2
Trade payables 217 457 546 656 822 Solvency ratio (%)
Other current liabilities 1,493 1,352 1,082 866 692 Debt to Equity ratio 0.3 0.4 0.5 0.5 0.5
Total current liabilities 1,710 1,809 1,627 1,521 1,514 Turnover ratios
Total Assets 16,172 18,890 21,965 28,143 32,430 Fixed asset turnover ratio (x) 1.3 1.4 1.6 1.5 1.5
Source: Company, Nirmal Bang Institutional Equities Research Debtor days 83 77 74 81 74
Inventory days 85 105 86 71 68
Creditor days 7 17 17 17 17
Net Working capital days 162 165 143 135 125
Source: Company, Nirmal Bang Institutional Equities Research

3 CCL Products (India)

 Institutional Equities
Rating track
272

Date Rating Market price (Rs) Target price (Rs)

27August 2014 Buy 90 140
10 October 2014 Buy 123 140
30 October 2014 Buy 134 183
20 January 2015 Buy 174 245
13 April 2015 Buy 214 245
28 May 2015 Buy 187 272
10 July 2015 Buy 185 272
22 July 2015 Buy 207 272
13 October 2015 UR 241 -
16 October 2015 Buy 224 272
4 February 2016 Buy 180 250
17 February 2016 Buy 167 250
2 March 2016 Buy 172 219
3 May 2016 Buy 194 238
2 August 2016 Buy 259 307
5 October 2016 Buy 246 328
5 January 2017 Buy 262 329
3 February 2017 Buy 311 363
24 May 2017 Buy 310 374
13 July 2017 Buy 280 326
3 November 2017 Accumulate 337 349
5 February 2018 Buy 276 346
22 May 2018 Accumulate 299 330
17 July 2018 Accumulate 272 300
23 October 2018 Buy 242 310
15 February 2019 Buy 278 310
16 June 2020 Buy 228 340
25 June 2020 Buy 244 340
27 July 2020 Buy 243 340
20 October 2020 Buy 252 340
19 November 2020 Buy 253 340
7 January 2021 Buy 261 360
28 January 2021 Buy 243 360
3 March 2021 Buy 245 420
23 May 2021 Buy 312 420
29 June 2021 Buy 362 480
29 July 2021 Buy 437 500
25 August 2021 Buy 386 450
27 September 2021 Buy 388 520
28 September 2021 Buy 385 520
28 October 2021 Buy 366 520
20 January 2022 Buy 443 520
21 February 2022 Buy 457 600
6 March 2022 Buy 406 600
28 May 2022 Buy 349 600
6 August 2022 Buy 444 600
12 September 2022 Buy 500 700
31 October 2022 Buy 493 700
24 November 2022 Buy 502 700
19 January 2023 Buy 518 650
21 February 2023 Buy 543 650
Coverage was transferred to Abhishek Navalgund with effect from 16th June 2020

4 CCL Products (India)

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Rating track graph

Jan-21
Apr-21
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Not Covered
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Feb-22

Covered
Apr-22
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Dec-22
Feb-23

CCL Products (India)

Institutional Equities
 Institutional Equities
DISCLOSURES
This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a
registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also
a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.

NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have
different or contrary views on stocks and markets.

NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in securities
Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its associates
or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the subject company.
NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject company at the end of
the month immediately preceding the date of publication of this research report.

NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other
benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer,
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Analyst Certification: I/We, Abhishek Navalgund, the Research Analyst and the authors of this report, hereby certify that the views
expressed in this research report accurately reflects my/our personal views about the subject securities, issuers, products, sectors or
industries. It is also certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion
of specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research report
and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.

6 CCL Products (India)

 Institutional Equities
Disclaimer
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BUY > 15%
ACCUMULATE -5% to15%
SELL < -5%
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Team Details:
Name Email Id Direct Line
Rahul Arora CEO [email protected] -

Girish Pai Head of Research [email protected] +91 22 6273 8017 / 18

Dealing
Ravi Jagtiani Dealing Desk [email protected] +91 22 6273 8230, +91 22 6636 8833

Michael Pillai Dealing Desk [email protected] +91 22 6273 8102/8103, +91 22 6636 8830

Nirmal Bang Equities Pvt. Ltd.

Correspondence Address
B-2, 301/302, Marathon Innova,
Nr. Peninsula Corporate Park,
Lower Parel (W), Mumbai-400013.
Board No. : 91 22 6273 8000/1; Fax. : 022 6273 8010

7 CCL Products (India)