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Multibagger Stock: CCL Products gains 126% in 2.5 years, 2,540% in 11 years. Is it still a purchase?
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Multibagger Stock: CCL Products gains 126% in 2.5 years, 2,540% in 11 years. Is it still a purchase?

Multi-bagger stock: CCL Products (India)engaged in the production, trading and distribution of coffee, has seen a remarkable rise in its stock price over the past few years, reaching new milestones and breaking records. The stock, which was trading at 315 per share in May 2022, jumped 126.3% to its current value of 713. In four years, the stock has gained 200% and a remarkable 2,540% over the past 11 years.

In September, the stock reached a new record of 855 per share. This extraordinary recovery can be attributed to the company’s strong financial results, driven by growing demand for its products.

Despite significant challenges, such as rising green coffee prices, intense competition and supply chain disruptions due to geopolitical issues—CCL Products managed to achieve healthy volume growth and maintain profitability per kilo.

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For the quarter ended September 2024 (Q2), the company reported 22% year-over-year (YoY) revenue growth, reaching 738 crore, driven by 10% YoY volume increase and higher contribution from value-added and high-margin products.

It generated strong growth in consolidated EBITDA, up 24.7% year-on-year. 137 crore in Q2FY25, with EBITDA margins up 48 basis points YoY to 18.6%. Net profit increased by 21% year-on-year 74 crore, with PAT margins standing at 10% in Q2FY25, in line with the previous quarter. The company also owns 50 crores of cash and cash equivalents on its balance sheet.

The company remains on track with its capacity expansion plans across all its subsidiaries. These efforts, along with a focused strategy to increase the share of premium and value-added products, aim to strengthen its position in the market.

Vietnam’s newly established freeze-dried coffee (FDC) factory with a capacity of 30,000 metric tons is on track and currently operating at a capacity utilization rate of 40-50%, showing progress constant towards full exploitation.

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Headwinds on coffee prices

Despite healthy volume growth in the second quarter, growth occurred at the lower end of management’s forecast due to a sharp rise in coffee prices, which impacted long-term contract bookings of society.

According to management, world coffee prices showed some slowdown, with further downside potential to the $3,800-4,000 range given favorable agricultural yields in Vietnam and Brazil. The company plans to secure additional long-term contracts once coffee prices stabilize, likely after December.

The company reaffirmed its volume growth guidance for FY25, forecasting robust growth of between 10% and 20%.

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Going forward, the company expects that rising coffee prices may lead to a shift in consumption patterns from out-of-home coffee consumption to more in-house consumption, which is good bodes well for the instant coffee industry. Recent estimates suggest that the domestic coffee market in India is growing at around 10-15% over the previous year.

Can the stock maintain its rally?

National brokerage firm LKP Securities expects CCL Products to maintain volume growth of around 15% through several strategic initiatives: a planned doubling of capacity from 38,500 tonnes in FY22 to around 77,000 tonnes d ‘here FY25, at its facilities in Vietnam and India, particularly in value. -addition of segments such as freeze-dried coffee and small packages; the introduction of high-margin products, including specialty coffees, which now represent 5% of sales; and a profitable business model.

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Additionally, the company aims to strengthen its presence in the UK, US and other key markets as part of its expansion strategy. Therefore, the brokerage maintains its “buy” rating on the stock with a price target of 881 each. He expects the company to post revenue, EBITDA and PAT CAGR of 19%, 25% and 29%, respectively, over FY24-26E.

Disclaimer: The opinions and recommendations given in this article are those of individual analysts. These do not represent the opinions of Mint. We advise investors to seek advice from certified experts before making any investment decisions.

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