BUY

Results Update CCL Products Ltd Target Price

07th November 2024 FMCG 820

Growth Momentum Continues; Maintain BUY (CMP as of 06th November 2024)

Est. Vs. Actual for Q2FY25: Revenue – BEAT; EBITDA – BEAT; PAT – BEAT CMP (Rs) 718
Upside /Downside (%) 14%
Changes in Estimates post Q2FY25
High/Low (Rs) 854/551
FY25E/FY26E: Revenue: 2%/3%; EBITDA: -4%/2%; PAT -12%/-6%
Market cap (Cr) 9596
Recommendation Rationale Avg. daily vol. (6m) Shrs ‘000 371
• The company reported solid revenue growth of ~22% YoY in Q2FY25, reaching Rs 738 Cr, No. of shares (Cr) 13
driven by volume growth of ~10% and higher realizations from premium coffee. EBITDA grew
by ~25% YoY, with EBITDA margins improving by 48bps YoY to 18.6%, supported by a Shareholding (%)
favourable product mix (higher value contracts), premium brand collaborations, and smaller Mar-24 Jun-24 Sep-24
SKUs. 46.3 46.1 46.1
Promoter
• The management remains optimistic about coffee prices stabilizing at current levels, with a 8.1 9.8 10.2
FIIs
potential for softening if favourable harvests materialize in Vietnam and Brazil. Volume growth
MFs/UTI 20.8 18.8 19.0
guidance for FY25 has been reaffirmed at 15-20%.
• Gross debt increased to Rs 1,974 Cr (as of Sep’24), primarily attributed to working capital Banks/FIs 0.0 0.0 0.0
needs amounting to Rs 1,300 Cr, with the remainder allocated to Capex. The new FDC plant Others 24.8 25.3 24.8
in Vietnam, with a capacity of 30,000 MT, is progressing as planned and is operating at a
capacity utilization rate of 40-50%. Financial & Valuations
• Sector Outlook: Positive Y/E Mar (Rs Cr) FY25E FY26E FY27E
Company Outlook & Guidance: We have revised our FY25/26 estimates downward to account Net Sales 3,204 3,895 4,733
for elevated coffee prices, increased depreciation, and higher interest costs. Despite these EBIDTA 508 662 857
adjustments, we maintain our BUY recommendation on the stock as we roll over our estimates to Net Profit 260 361 510
Dec-26. 19.5 27.1 38.3
EPS, Rs
Current Valuation: 23x Dec-26 EPS (Earlier Valuation: 23x Sep-26 EPS ). PER, x 36.8 26.5 18.8
EV/EBIDTA, x 22.2 17.6 13.6
Current TP: Rs 820/share(Earlier TP: Rs 760/share)
ROE, % 13.9 16.7 19.6
Recommendation: With a 14% upside from the CMP, we maintain our BUY rating on the stock. 0.9 0.8 0.6
Debt/Equity (%)
Financial Performance: CCL Products’ consolidated revenue for Q2FY25 was Rs 738 Cr,
reflecting a 21.5% YoY growth, driven by ~10% volume growth. Gross margins declined by 218bps Change in Estimates (%)
to 39.8%, impacted by volatility in coffee prices. EBITDA increased to Rs 137 Cr, a 24.7% YoY Y/E Mar FY25E FY26E
rise, while EBITDA margins improved to 18.6%, up 48bps YoY, supported by higher value Sales 2% 3%
contracts and smaller pack sizes (SKUs). The company's PAT stood at Rs 74 Cr, a 21.5% YoY EBITDA -4% 2%
increase, surpassing expectations.
PAT -12% -6%
Outlook & Recommendation: CCL Products has been consistent in its performance despite
volatility in coffee prices. Post supply chain disruptions, several coffee companies globally are Relative Performance
looking to de-risk their supplies and are therefore seeking to partner with manufacturers that have 165
a presence in different territories. In this context, CCL Products stands as the right choice for these
145
companies for the following reasons: 1) It has facilities in Vietnam and India, unlike Brazilian
125
players who are present only in their home country. This has enabled CCL to establish a strong
105
foothold in international markets, continue gaining market share, and access new business.
85
Furthermore, it is looking to invest more in the UK and US markets to expand further. The
company targets a 15% global market share in the next few years; 2) The company enjoys a cost- 65

efficient business model; 3) It is doubling its capacity from 38,500 MT in FY22 to approximately 45

77,000 MT by FY25 across Vietnam and India; 4) It is adding capacity in value-added products 25
May-23 Aug-23 Dec-23 Mar-24 Jul-24 Nov-24
(FDC and small packs) in Vietnam; and 5) It is aggressively scaling up its Domestic business led
by branded business. We have cut our FY25/26 PAT estimates to factor in high coffee prices, CCL Products (India) Ltd. BSE Sensex
higher depreciation, and interest cost.

Key Financials (Consolidated) Source: Ace Equity, Axis Securities

(Rs Cr) Q2FY25 QoQ (%) YoY (%) Axis Est. Variance
Net Sales 738 (4.5) 21.5 729 1.3
EBITDA 137 5.2 24.7 129 6.4

EBITDA Margin (%) 18.6 172 bps 48 bps 17.7 89 bps

Preeyam Tolia
Net Profit 74 3.5 21.5 70 5.7 Research Analyst
email: [email protected]
EPS (Rs) 5.6 3.5 21.5 5.3 5.7

Source: Company, Axis Research SuhaneeShome

Research Associate
email: [email protected]

1
Concall highlights

• Domestic Business: The domestic business continued its strong growth, recording Rs 105 Cr in Q2FY25, with Rs

70 Cr contributed by pure branded business (Rs 140 Cr in H1FY25). The company aims to achieve Rs 300 Cr in

branded business by FY25.

• Distribution Network: With extensive ground-level initiatives underway, the company is aggressively expanding

its distribution reach beyond its core Southern market to untapped regions across India.

• Vietnam Freeze-Dried Capacity: The new freeze-dried capacity in Vietnam is on track for commercial operations

by Q3FY25. Although trial phases have been extended for certifications, testing, and blend consistency, the

company anticipates a higher-than-usual initial utilization rate of 40-50% in year one due to strong demand,

compared to its standard starting utilization of 30%.

• India Plant: The Indian facility is set for commercial operations within a month, as trials and certifications near

completion. Management expects capacity utilization to follow a steady ramp-up trajectory, targeting 30% in the

first year, 60% in the second, and 80% thereafter.

Key Risks to Our Estimates and TP

• Delay in capacity utilisation, the emergence of supply chain constraints, and increase in coffee prices.

Change in Estimates

Old New % change

FY25E FY26E FY25E FY26E FY25E FY26E

Revenue 3,131 3,769 3,204 3,895 2% 3%

EBITDA 529 651 508 662 -4% 2%

PAT 295 385 260 361 -12% -6%

EPS 22.1 29.0 19.5 27.1 -12% -6%

Source: Company, Axis Securities

2
Results Review
Var (%)
% Change % Change
Rs Cr Q2FY24 Q1FY25 Axis Est. Q2FY25 Axis Sec
(YoY) (QoQ)
Est.
Net Sales 608 773 729 738 21.5 (4.5) 1.3
Gross Profit 255 294 299 294 15.2 (0.3) (1.8)
Gross Margin (%) 42.0 38.1 41.0 39.8 -218 bps 171 bps -122 bps
Employee Expenses 32 38 38 40 26.4 5.0 7.1
Other Expenses 113 126 132 116 2.7 (7.5) (12.2)
EBITDA 110 130 129 137 24.7 5.2 6.4
EBITDA Margin (%) 18.1 16.8 17.7 18.6 48 bps 172 bps 89 bps
Oth. Inc 1 1 1 1 (25.5) (59.2) (61.2)
Interest 18 21 22 27 44.9 24.2 23.0
Depreciation 23 23 23 24 5.0 3.0 1.9
PBT 70 87 85 87 25.3 0.1 2.2
Tax 9 16 15 13 51.0 (15.0) (13.2)
PAT 61 71 70 74 21.5 3.5 5.7
EPS 4.6 5.4 5.3 5.6 21.5 3.5 5.7
Source: Company, Axis Securities

3
Financials (consolidated)
Profit & Loss (Rs Cr)
Y/E Mar FY24 FY25E FY26E FY27E
Net sales 2,654 3,204 3,895 4,733
Growth, % 28.1 20.8 21.5 21.5
Total income 2,654 3,204 3,895 4,733
Raw material expenses (1,552) (1,909) (2,291) (2,749)
Employee expenses (146) (167) (193) (221)
Other Operating expenses (511) (620) (749) (906)
EBITDA (Core) 445 508 662 857
Growth, % 11.4 14.1 30.3 29.4
Margin, % 16.8 15.9 17.0 18.1
Depreciation (98) (115) (144) (162)
EBIT 348 393 518 695
Growth, % 3.4 13.0 31.8 34.3
Margin, % 13.1 12.3 13.3 14.7
Interest paid (78) (101) (106) (111)
Other Income 6 7 8 9
Non-recurring Items - - - -
Pre-tax profit 276 299 420 593
Tax provided (26) (39) (59) (83)
Profit after tax 250 260 361 510
Growth, % (11.9) 4.0 38.8 41.3
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Y/E Mar FY24 FY25E FY26E FY27E
Debtors 497 600 729 886
Inventory 788 952 1,157 1,406
Other current assets 286 286 286 286
Total current assets 1,741 1,770 1,735 2,072
Investments 0 0 0 0
Gross fixed assets 1,683 1,983 2,483 2,783
Less: Depreciation (432) (547) (691) (852)
Add: Capital WIP 501 501 501 501
Net fixed assets 1,753 1,937 2,293 2,432
Non-current assets 42 42 42 42
Total assets 3,536 3,750 4,071 4,546

Current liabilities 1,278 1,299 1,325 1,356

Provisions 3 3 3 3
Total current liabilities 1,282 1,302 1,328 1,360
Non-current liabilities 581 581 581 581
Total liabilities 1,862 1,883 1,909 1,940
Paid-up capital 27 27 27 27
Reserves & surplus 1,647 1,841 2,135 2,579
Shareholders’ equity 1,674 1,867 2,162 2,605
Total equity & liabilities 3,536 3,750 4,071 4,546
Source: Company, Axis Securities

4
Cash Flow (Rs Cr)
Y/E Mar FY24 FY25E FY26E FY27E
Pre-tax profit 276 299 420 593
Depreciation 98 115 144 162
Chg in working capital 29 (246) (308) (375)
Total tax paid (37) (39) (59) (83)
Other operating activities (10) (10) (10) (10)
Cash flow from operating activities 356 119 187 287
Capital expenditure (538) (300) (500) (300)
Other investing activities - - - -
Cash flow from investing activities (538) (300) (500) (300)
Free cash flow (182) (181) (313) (13)
Other financing activities (59) (59) (59) (59)
Cash flow from financing activities 259 (59) (59) (59)
Net chg in cash 77 (240) (372) (72)
Opening cash balance 83 170 (68) (437)
Closing cash balance 170 (68) (437) (507)
Source: Company, Axis Securities
Ratio Analysis (%)
Y/E Mar FY24 FY25E FY26E FY27E
Per Share data
EPS (INR) 18.8 19.5 27.1 38.3
Growth, % (11.9) 4.0 38.8 41.3
Book NAV/share (INR) 125.9 140.4 162.6 195.9
FDEPS (INR) 18.8 19.5 27.1 38.3
CEPS (INR) 26.1 28.2 38.0 50.5
CFPS (INR) (1.6) 9.2 14.2 21.6
Return ratios
Return on assets (%) 10.7 9.9 11.9 14.4
Return on equity (%) 14.9 13.9 16.7 19.6
Return on capital employed (%) 16.3 15.3 18.0 20.9
Turnover ratios
Asset turnover (x) 1.0 1.0 1.0 1.1
Sales/Total assets (x) 0.9 0.9 1.0 1.1
Sales/Net FA (x) 1.7 1.7 1.8 2.0
Working capital/Sales (x) 0.1 0.2 0.2 0.3
Receivable days 68.3 68.3 68.3 68.3
Inventory days 108.4 108.4 108.4 108.4
Payable days 16.5 16.3 16.5 16.7
Working capital days 40.3 61.4 79.4 94.2
Liquidity ratios
Current ratio (x) 1.4 1.4 1.3 1.5
Quick ratio (x) 0.7 0.6 0.4 0.5
Interest cover (x) 4.5 3.9 4.9 6.2
Total debt/Equity (%) 1.0 0.9 0.8 0.6
Valuation
PER (x) 38.2 36.8 26.5 18.8
PEG (x) - y-o-y growth (3.2) 9.2 0.7 0.5
Price/Book (x) 5.7 5.1 4.4 3.7
EV/Net sales (x) 4.2 3.5 3.0 2.5
EV/EBITDA (x) 24.7 22.2 17.6 13.6
EV/EBIT (x) 31.7 28.6 22.4 16.8
Source: Company, Axis Securities

5
CCL Products Price Chart and Recommendation History

Date Reco TP Research

01-Jan-23 BUY 600 Top Picks
19-Jan-23 BUY 650 Result Update
01-Feb-23 BUY 600 Top Picks
01-Mar-23 BUY 650 Top Picks
01-Apr-23 BUY 650 Top Picks
02-May-23 BUY 660 Top Picks
18-May-23 BUY 750 Result Update
01-Jun-23 BUY 750 Top Picks
01-Jul-23 BUY 750 Top Picks
18-Jul-23 BUY 750 Result Update
01-Aug-23 BUY 730 Top Picks
01-Sep-23 BUY 750 Top Picks
03-Oct-23 BUY 750 Top Picks
08-Nov-23 BUY 700 Result Update
07-Feb-24 BUY 720 Result Update
14-May-24 BUY 670 Result Update
09-Aug-24 BUY 760 Result Update
07-Nov-24 BUY 820 Result Update

Source: Axis Securities Research

6
Axis Securities Limited is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest private sector banks and has its
various subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of which
are available on www.axisbank.com.

Axis Securities Limited, is registered as a

• Stock Broker, Depository Participant, Portfolio Manager, Investment Adviser and Research Analyst with Securities and Exchange Board of India
• Corporate Agent with Insurance Regulatory and Development Authority of India
• Point of Presence with Pension Fund Regulatory and Development Authority
• Distributor for Mutual Funds with AMFI

Registration Details:

SEBI Single Reg. No.- NSE, BSE,MSEI, MCX & NCDEX – INZ000161633 | SEBI Depository Participant Reg. No. IN-DP-403-2019 | Portfolio Manager Reg. No.-
INP000000654 | Investment Advisor Reg No. INA000000615 | SEBI-Research Analyst Reg. No. INH000000297 | IRDA Corporate Agent (Composite) Reg. No. CA0073|
PFRDA – POP Reg. No. POP387122023 | Mutual Fund Distributor ARN- 64610.

Compliance Officer Details: Name – Mr. Maneesh Mathew, Tel No. – 022-68555574, Email id – [email protected].;

Registered Office Address – Axis Securities Limited, Unit No.002, Building- A, Agastya Corporate Park, Piramal Realty, Kamani Junction, Kurla (W), Mumbai – 400070.

Administrative office address: Axis Securities Limited, Aurum Q Parć, Q2 Building, Unit No. 1001, 10th Floor, Level – 6, Plot No. 4/1 TTC, Thane – Belapur Road,
Ghansoli, Navi Mumbai, Pin Code – 400710.

In case of any grievances please call us at 022-40508080 or write to us [email protected].

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years.
However, SEBI, Exchanges, Clearing Corporations and Depositories etc. have conducted the routine inspection and based on their observations have issued
advise/warning/show cause notices/deficiency letters/ or levied penalty or imposed charges for certain deviations observed in inspections or in normal course of business,
as a Stock Broker / Depository Participant/Portfolio Manager. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor
has our certificate of registration been cancelled by SEBI at any point of time.

Investments in securities market are subject to market risks. Read all the related documents carefully before investing.
By referring to any particular sector, Axis Securities does not provide any promise or assurance of favourable view for a particular industry or sector or business group in
any manner.

Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any
assurance of returns to investors. None of the research recommendations promise or guarantee any assured, minimum or risk-free return to the investors. Our research
should not be considered as an advertisement or advice, professional or otherwise. This research report and its respective content by Axis Securities made available on
this page or otherwise do not constitute an offer to sell or purchase or subscribe for any securities or solicitation of any investments or investment services for the
residents of Canada and / or USA or any jurisdiction where such an offer or solicitation would be illegal.

Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report. Derivatives are a sophisticated investment
device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding
future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication by ASL and are subject to change
without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities
and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial
instruments.

The information and opinions in this report have been prepared by Axis Securities and are subject to change without any notice. The report and information contained
herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any
other person or to the media or reproduced in any form, without prior written consent of Axis Securities. The report must not be used as a singular basis of any investment
decision. The views herein are of a general nature and do not consider the risk appetite, investment objective or the particular circumstances of an individual investor. The
investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice
before investing.

While we would endeavour to update the information herein on a reasonable basis, Axis Securities is under no obligation to update or keep the information current. Also,
there may be regulatory, compliance or other reasons that may prevent Axis Securities from doing so. Non-rated securities indicate that rating on a particular security has
been suspended temporarily and such suspension is in compliance with applicable regulations and/or Axis Securities policies, in circumstances where Axis Securities
might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained in good faith from public sources and sources believed to be reliable, but no independent verification has been made nor is its
accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or
solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may
receive this report at the same time. Axis Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes
investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient
should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any
other reason. Axis Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily
a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual
results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Axis
Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months. Axis Securities or its associates might have received any compensation from the companies mentioned in
the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance,
investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. Axis Securities or its associates might have
received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report
in the past twelve months. Axis Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. Axis
Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with
preparation of the research report. Accordingly, neither Axis Securities nor Research Analysts and / or their relatives have any material conflict of interest at the time of
publication of this report. Please note that Axis Securities has a proprietary trading desk. This desk maintains an arm’s length distance with the Research team and all its

7
 NEERAJ Digitally signed by NEERAJ
CHADAWAR
CHADAWAR Date: 2024.11.07 09:04:05 +05'30'

activities are segregated from Research activities. The proprietary desk operates independently, potentially leading to investment decisions that may deviate from
research views.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

Research Analyst may have served as an officer, director or employee of subject company(ies). Axis Securities or Research Analysts or their relatives do not own 1% or
more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of
Axis Securities and Axis Securities as an entity are engaged in various financial service businesses, they might have financial interests or actual/beneficial ownership of
one percent or more or other material conflict of interest in various companies including the subject company/companies mentioned in this report. Axis Securities may
have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Certain transactions -including those
involving futures, options and other derivatives as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. Reports based on
technical analysis centres on studying charts of a stock'sprice movement and trading volume, as opposed to focusing on a company's fundamentals and as such, may not
match with a report on a company's fundamentals.

We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short
positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn
brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender
/ borrower to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time
of publication of Research Report or at the time of public appearance. Axis Securities may have proprietary long/short position in the above mentioned scrip(s) and
therefore may be considered as interested. This should not be construed as invitation or solicitation to do business with Axis Securities. Axis Securities is also a Portfolio
Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and accordingly PMS may have positions contrary to the
PCG research recommendation.

RATING SCALE: Definitions of ratings

Ratings Expected absolute returns over 12 – 18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock, but we refrain from assigning valuation and recommendation.

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward-looking estimates, valuation or recommendation for the stock

Note: Returns stated in the rating scale are our internal benchmark.