Buy CCL Products India; target of Rs 291: Edelweiss

Edelweiss' research report on CCL Products India
CCL Products India’s (CCL) Q1FY18 results came below our estimates,both on top-line/bottom-line fronts. This was mainly due to high base and as CCL focused on strategy of increasing volumes by compromising on margins to gain new customers. Further, supply of agglomerated coffee from India to Vietnam impacted profitability as seen in Q4FY17.Led by the strategy change, the company has revised upwards its volume growth guidance to 15-20% for FY18, while maintaining bottom-line growth at 10-15%. CCL’s agglomerated coffee capacity is expected to commission in Q2FY18 post which margins should improve.

Outlook

We believe a resilient business model, rising utilisation rate, increasing focus on market share and capacity expansion in value-added segment places CCL in a sweet spot to post sales /PAT CAGR of 17%/20% over FY17-19E. Thus, despite lowering our FY18/19 estimates, we maintain ’BUY’ with TP of INR291 (20x FY19E EPS).

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