LKP Securities

CCL Products (Buy)

Target: ₹320

CMP: ₹246

CCL Products, formerly Continental Coffee Ltd, was promoted in 1995 by Challa Rajendra Prasad and is now celebrating its Silver Jubilee with a capacity of 25,000 tonnes in India and 10,000 tonnes in Vietnam with the ability to make both spray-dried as well as freeze dried coffee. About 60 per cent of its revenues constitute branded business while the rest accounts for private label and bulk business.

While the pandemic has adversely impacted the HORECA segment, CCL is witnessing robust growth from the in-house consumption and its Vietnam unit has not seen any disruption while the carry forward stocks at its India unit would, in our view, help mitigate the postponement of orders in the early part of the first quarter.

With exports accounting for over 75 per cent of its revenues (Marquee names such as Strauss & JDE as its customers), the ability to expand without equity dilution and new technologies and processes leading to yield improvements, we are optimistic on sustainable margin expansion due to sustained improvement in product mix. The Indian unit of CCLP operates at 80 per cent utilisation and with the recently commissioned freeze dried unit fast ramping up production we expect growth trajectory to accelerate going forward.

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