Buy CCL Products; target of Rs 384: Edelweiss
Edelweiss’ research report on CCL Products
CCL Products’ (CCL) Q1FY19 results benefited from favourable change in product mix leading to beat in our estimates by 17% in topline and 21% in bottomline. EBITDA margins improved by 300bps YoY to 21.6% as company benefitted from supply of higher profitable products from Vietnam. The strong growth was led by volume growth of around 30% YoY (on low base) however green coffee prices have declined by 15-20% and the impact of the same will be visible in subsequent quarters. As per management, FY19 topline growth to remain muted due to drop in realization with PAT growth of 10-20%. Commissioning of Freeze dry capacity will be key growth driver.
Management is also excited about its foray into retailing its own brand (FY19E sales of INR1bn) which offers a strong growth opportunity. With an FY18–20E earnings CAGR of 20% and ROCE of 28%, as well as the expectation of strong cash flows, we maintain BUY with target price of INR384 based on 24x FY20E EPS.
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