Buy CCL Products India Ltd For Target Rs.1,300 by Choice Institutional Equities
Q2FY27 Operating Performance below Expectation
CCL Products (CCLP) profitability was below estimate due to higher opex. Revenue growth was broadly in line, driven by (a) Double-digit volume growth, supported by a sustained demand amid ~18% YoY lower green coffee price and (b) Continued strong momentum in the branded business. Revenue growth was lower than volume growth due to a reduced realisation, resulting from softer green coffee price, consistent with the company's cost-plus pricing model. EBITDA/kg remained stable at INR 140. CCLP conservatively maintained its FY27 guidance of 15% volume and EBITDA growth, citing ‘wait and watch’ approach adopted by customers.
Branded Business (Continental) Remains Resilient
Branded business revenue stood at INR 1.4 Bn (INR 2.65 Bn 1HFY27), registering ~25% YoY growth. The management reiterated its FY27 branded revenue guidance of INR 5.5–6.0 Bn. Domestic revenue stood at INR 2.10 Bn
Q2FY27: Operating Performance Below Expectation
* Revenue was up 7.5% YoY and up 0.9% QoQ to INR 12,108 Mn (vs. CIE estimate of INR 12,309 Mn), Volume grew in the range of 10%–15% (vs. CIE estimate of 15%)
* EBITDA was up 7.6% YoY and down 0.7% QoQ to INR 2,121 Mn (vs. CIE estimates of INR 2,208 Mn). EBITDA margin remained flat YoY and 139 bps QoQ to 17.5% (vs. CIE estimates of 17.9%). Higher other expenses, which increased 35.9% YoY due to higher freight cost, lower forex gain etc., weighed on operating profitability
* PAT was up 29.0% YoY and up 11.3% QoQ to INR 1,301 Mn (vs. CIE estimates of INR 1,392 Mn), supported by lower interest cost and a lower effective tax rate on a YoY basis
* CCL’s gross and net debt stood at INR 11.0 Bn and INR 7.4 Bn, respectively, as of September 2026. Management maintained its FY27 guidance of INR 10–12 Bn for gross debt and INR 8.0 Bn for net debt, factoring in higher working capital requirement.
Valuation:
We have decreased our FY27/FY28 estimates to account for higher opex (ad-spends, freight cost etc.). We expect Revenue/EBITDA/PAT CAGR of 15%/16%/25% over FY26-29E and value the company using the DCF approach, having a revised TP of INR 1,300 (vs. INR 1,420), with a 30% upside and a BUY rating. This equates to an implied PE of 25x on Sep-28 EPS and PEG of 1.4.
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SEBI Registration no.: INZ 000160131
