Buy CCL Products, target price Rs 730: Axis Securities

Axis Securities has a buy call on CCL Products India with a target price of Rs 730. The current market price of CCL Products India is Rs 596.35. CCL Products, incorporated in 1961, is a Mid Cap company with a market cap of Rs 7915.54 crore, operating in the Tea / Coffee sector.

CCL Products' key products/revenue segments include Coffee for the year ending 31-Mar-2024.



Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 761.18 crore, up 3.04% from last quarter Total Income of Rs 738.74 crore and up 14.36% from last year same quarter Total Income of Rs 665.61 crore. The company has reported net profit after tax of Rs 63.04 crore in latest quarter.

The company?s top management includes Mr.Challa Rajendra Prasad, Dr.Krishnanand Lanka, Mrs.Kulsoom Noor Saifullah, Mr.Durga Prasad Kode, Mr.K V Chowdary, Mr.G V Krishna Rau, Mr.Satyavada Venkata Ramachandra Rao, Mr.K K Sarma, Ms.Challa Shantha Prasad, Mr.B Mohan Krishna, Mr.Challa Srishant, Mr.Sudhakar Ambati. Company has Ramanatham & Rao as its auditors. As on 31-12-2024, the company has a total of 13 crore shares outstanding.

Investment Rationale
CCL Products has maintained consistent performance despite volatility in coffee prices. Following supply chain disruptions, several global coffee companies are looking to de-risk their supplies by partnering with manufacturers that have a presence across multiple geographies. In this context, CCL Products is well-positioned as a preferred choice due to the following factors: 1) It has facilities in Vietnam and India, unlike Brazilian players that operate only in their home country. This geographic advantage has helped CCL strengthen its foothold in international markets, gain market share, and access new business. Additionally, it is looking to invest further in the UK and US markets. The company targets a 15% global market share in the next few years; 2) It operates a cost-efficient business model; 3) It is doubling its capacity from 38,500 MT in FY22 to approximately 77,000 MT by FY25 across Vietnam and India; 4) It is expanding capacity in value-added products such as FDC and small packs in Vietnam; and 5) It is aggressively scaling up its domestic business, led by its branded segment. Axis Securities has revised its FY25/26 PAT estimates downward to factor in high coffee prices, increased depreciation, and higher interest costs.

Promoter/FII Holdings
Promoters held 46.09 per cent stake in the company as of 31-Dec-2024, while FIIs owned 10.13 per cent, DIIs 21.06 per cent.