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CCL Products India (CCL) is one of the largest producers of Instant Coffee for private labels. The company has manufacturing plants at strategic locations in Coffee growing areas i.e., India and Vietnam. Apart from its B2B prominence, CCL has also ventured into the retail space through its own Brands - Continental, Malgudi & THIS reported stellar growth to carve an over 8% market share in the growing domestic Instant Coffee Market. It manufactures spray-dried, agglomerated and freeze-dried coffee at Duggirala and Kuvvakolli in India, Dak Lak in Vietnam and Les Verrières in Switzerland, with total capacity of ~77,000 MTPA after its recent expansion. Apart from its overseas presence across the continents, CCL's domestic Continental Coffee brand reaches 1.5 lakh retail outlets through 700+ distributors, with branded sales of Rs4.4bn in FY26. With the major capex now complete, the company is moving from a capex cycle to a cash flow cycle.

* One of the largest Instant Coffee manufacturers for the Global Private Labels: CCL is one of the largest instant coffee manufacturers for the private labels, with over 250 clients. CCL offers more than 200 instant Coffee recipes/blends to its B2B clients to choose from. Further, CCL enjoys locations of its plants in the close vicinity of the fastest growing Instant Coffee market of South-East Asia and the Robusta Coffee Heartland of India and Vietnam. Its Swiss Granulation facility gives it an easy access to one of the largest Coffee markets i.e., Europe and Russia.

* Cost-plus model insulates its profitability from Coffee price volatility: CCL earns a largely fixed EBITDA per kg (~Rs146/kg in FY25-26), therefore elevated green coffee prices drive revenue without lifting EBITDA, compressing reported margins to 16.4% in FY26. As coffee prices soften, we expect EBITDA margins to recover to 18.6% by FY29E, while EBITDA per kg rises 3-4% a year due to rising contribution of high margin freeze-dried coffee and value-added premixes.

* High capex period seems over; deleveraging ahead: With annual capex run rate falling from Rs4-5bn over FY22-25 to a mere Rs0.3bn over the next three years, we expect CCL to generate superior free cash flows to the tune of Rs5.3-6.1bn annually. The management intends to use majority of the free cash flow for deleveraging the balance sheet and expects gross borrowings to come down from Rs11.0bn in FY26 to Rs2.0bn by FY29E, improving RoE from 16.6% FY26 to ~23.8%.

* Outlook & Valuation: With a global cost-leadership position in private-label instant coffee space, CCL Products is expected to deliver consistent performance despite volatility in coffee prices. We estimate Revenue, EBITDA and PAT CAGR of 13%, 18% and 31% respectively over FY26-29E. Our 1 year forward DCF target for CCL Products stands at Rs1415, with an upside potential of 52.0% from the current levels. Our DCF target price implies P/E multiple of 27.0x on FY28E.

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