Buy CCL Products Ltd For the Target Rs. 970 By Axis Securities Ltd
Strong Beat on Revenue; Margins Miss
Est. Vs. Actual for Q1FY26: Revenue – BEAT ; EBITDA – MISS; PAT – MISS
Changes in Estimates post Q1FY26
FY2E6/FY27E: Revenue: 2%/4%; EBITDA: 5%/8%; PAT 7%/10%
Recommendation Rationale
• CCL Revenue Soars 36.5% YoY, Beats Estimates: For Q1FY26, CCL reported revenue of Rs 1,056 Cr, up 36.5% YoY, significantly ahead of our estimate of 14% growth, driven by healthy double-digit volume expansion. The domestic business remained robust, contributing ~Rs 150 Cr, of which the branded and retail segments contributed ~Rs 100 Cr. This strong performance continues to drive steady market share gains across channels and geographies.
• EBITDA Grows Despite Margin Pressure from Input Costs: EBITDA grew 22.1% YoY in Q1FY26, although margins contracted by 178 bps to 15.1%, impacted by input cost pressures. Management remains confident of achieving 15–20% annual EBITDA growth, driven by a balanced focus on volume expansion and margin optimisation.
• Coffee Prices Remain Volatile Amidst Harvest Uncertainty: Management indicated that despite a 20–30% softening in green coffee prices, ongoing volatility is keeping buyers cautious. The interim period between Brazil’s completed harvest and Vietnam’s upcoming crop in December remains uncertain. Stability during this phase could support further price correction post the Vietnam harvest.
• Company Continues Deleveraging with Net Debt Reduction Goal: The company's net debt stood at Rs 1,671 Cr as of 30th Jun’25, down from Rs 1,812 Cr in Mar’25 and Rs 1,974 Cr in Dec’24. It aims to further reduce net debt to Rs 1,350 Cr by Dec’25, reflecting its continued focus on deleveraging.
Sector Outlook: Positive
• Company Outlook & Guidance: Considering the long-term growth outlook, we have increased our FY26/27 estimates and maintain our BUY recommendation on the stock.
Current Valuation: 23x Mar’27E EPS (Earlier Valuation: 21x Mar’27E EPS ).
Current TP: Rs 970/share (Earlier TP: Rs 800/share)
Recommendation: With a 12% upside from the CMP, we maintain our BUY rating on the stock.
Financial Performance:
CCL Products’ consolidated revenue for Q1FY26 stood at Rs 1,056 Cr, registering a 36.5% YoY growth. Gross margins declined by 543 bps to 32.6%, due to cost input pressures. EBITDA increased to Rs 159 Cr, up 22.1% YoY, while EBITDA margins declined by 178 bps YoY to 15.1%. The company's PAT stood at Rs 72 Cr, up 1.4% YoY.
Outlook & Recommendation
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 with a presence across multiple geographies. In this context, the company 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 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. We have increased our FY26/27 estimates and maintain our BUY recommendation on the stock with a TP of Rs 970/share, implying an upside potential of 12% from the CMP.
Key Risks to Our Estimates and TP
• Delay in capacity utilisation, the emergence of supply chain constraints, and increased coffee prices.
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