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Overall mixed performance; commodity prices a key monitorable

Volume led topline growth: CCL products posted strong topline growth of 18.1% YoY/6.4% QoQ to Rs 773.3cr led by volume growth of 15% YoY. In India, the company is operating at peak capacity, while in Vietnam, it is utilizing 100% of its capacity, and newer facilities are operating at 50% capacity. Going ahead, their core focus will be on volume growth and focus will be on to grow at double digit volume growth.

Profits rise amid cost pressures: Its gross profit was higher by 13.0% YoY but declined 5.8% QoQ to Rs 294.4cr with margins at 38.1%, declined by 170 bps YoY but improved by 485bps QoQ primarily due to higher raw material costs. EBITDA rose by 22.5% YoY and 10.3% QoQ; however, the margin showed a slight improvement of 61 bps YoY and 59 bps QoQ to 16.8%. This increase was due to the company securing some high-value contracts during the quarter. PAT grew by 17.7% YoY and 9.6% QoQ to Rs 71.5cr with margin at 9.2% which decreased by 3bps YoY but improved 27bps QoQ, due to lower depreciation.

Management guidance intact for long term but cautiousness in the near term: Management remains cautiously optimistic as they believe that clients are delaying in signing long term contracts while they are currently focusing on short term contracts due to fluctuation in commodity prices. Besides, the demand and consumption pattern remains intact so optimism continues going ahead and expects volume to grow in the range of 10-20% in next couple of years and expects EBITDA margin to improve further with improvement in orders, stabilization of raw material cost and focus on branded and premium products however, any deviation may impact overall growth.

Key Highlights:

* Tough environment in terms of raw materials as well as signing of long term contracts remains a concern on one side however on the other side, coffee consumption & demand is intact thus management remains cautiously optimistic.

* Amongst the geographies, 40% of the volumes come from the Asian market, while East Europe, West Europe & the UK, and North America contribute 25%, 15%, and 15%, respectively.

* Clients are focusing more on signing shorter term contracts while long term contracts are seeing a decline due to fluctuation in commodity prices.

* The focus is on boosting sales of branded products, with plans to increase market share and achieve a 45%-50% revenue growth in the branded business in India.

* Small packs products are 20% of the mix. Going forward, value added products and small packs will help to improve the margins.

* India Branded business was ~Rs 95cr in Q1FY25 while the focus is to earn ~Rs 300cr for FY25.Further, company is targeting 7-8% EBITDA Margin from Branded products in FY25.

Outlook & Valuation: CCL Products reported steady numbers with double digit volume growth while gross margin remained impacted led by higher commodity prices. Going ahead, management remains cautiously optimistic with strong demand conditions, capacity expansion as per plan along with improving utilization however commodity prices a key monitorable but with stabilization ahead it would aid growth. We remain positive on the growth prospect of the company in the medium to long term perspective given the product portfolio, volume led growth and expansion however near term may see volatility. Thus, we have estimated its revenue/EBITDA/PAT to grow at 23%/25.6%/30% CAGR over FY24-26E and maintain our Buy rating with the revised target price of Rs 775

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