3QFY2018 Result Update | Coffee
February 5, 2018
CCL Products
BUY
CMP
`278
Performance Update
Target Price
`360
Y/E March (` cr)
Q3FY18
Q3FY17
% yoy
Q2FY18
% qoq
Investment Period
12 month
Net sales
274
289
(5)
296
(8)
EBITDA
65
77
(16)
58
11
Stock Info
EBITDA margin (%)
23.7
26.7
(300bp)
19.5
417bp
Sector
Coffee
Adjusted PAT
40
46
(11)
33
21
Market Cap (Rs cr)
3,699
Source: Company, Angel Research
Net Debt
125
Beta
0.5
For Q3FY18, CCL products (CCL) posted subdued set of results on a strong base
52 Week High / Low
371/ 250
of Q3FY17. The management expects a strong fourth quarter to achieve the
Avg. Daily Volume
4,626
Face Value (Rs)
10
yearly revenue growth guidance of 10%. Revenues degrew by ~5% yoy and while
BSE Sensex
35,067
Nifty
10,760
the operating margins were also lower on yearly basis.
Reuters Code
CCLP.BO
Bloomberg Code
CCLP IN
Revenue fell owing to fall in green prices: The company’s top-line fell by ~5% yoy
to `274 cr due to a fall in green coffee prices while the volume growth was still
Shareholding Pattern (%)
robust. Its Vietnam facility is running at full capacity utilization and reported 16%
Promoters
45.0
growth in revenue.
MF / Banks / Indian Fls
16.3
FII / NRIs / OCBs
25.3
Margins were decent: On the operating front, the company’s margin were robust
Indian Public / Others
13.5
at 23.7% in spite of unfavourable base effect in Indian operations. Q3FY17 was a
exceptional quarter as it had positive spillover effect from previous quarter.
Abs. (%)
3m 1yr
3yr
Sensex
4.5
24.3
19.0
Outlook and Valuation: We maintain our estimates in view of robust offtake
CCL Products
(18.0)
(10.9)
45.0
expectations of its coffee in upcoming quarters. We expect CCL to report a
revenue CAGR of ~18% over FY18-20E mainly due to (a) higher off take from
upcoming facilities in India (b) higher B2C sales via Continental brand; and (c)
better offtake in Vietnam facilities. On the bottom-line front, we expect a higher
CAGR of ~26% to `229cr over the same period on the back of strong revenue
Historical share price chart
and lower interest costs. Post the recent correction, the stock is trading very
400
attractively at 19.3x its FY19E earnings. Thus, we maintain our BUY rating with
350
300
the Target Price of `360.
250
200
Key Financials
150
Y/E March (` cr)
FY2017
FY2018E
FY2019E
FY2020E
100
Net Sales
50
976
1165
1408
1608
0
% chg
4.8%
19.3%
20.9%
14.1%
Net Profit
134
144
192
229
% chg
10.0%
7.3%
33.0%
19.2%
Source: Company, Angel Research
OPM (%)
23.9%
21.0%
22.5%
23.0%
EPS (Rs)
10.1
10.8
14.4
17.2
Nidhi Agrawal
P/E (x)
27.5
25.7
19.3
16.2
+022 39357600, Extn: 6872
P/BV (x)
5.8
5.0
4.2
3.5
RoE (%)
21%
20%
22%
22%
RoCE (%)
28%
26%
30%
31%
EV/Sales (x)
3.9
3.3
2.7
2.3
EV/EBITDA (x)
16.4
15.5
11.9
10.1
Please refer to important disclosures at the end of this report
1
CCL products| 3QFY2018 Result Update
Exhibit 1: Q3FY2018 Performance
Q3FY18
Q3FY17
% yoy Q2FY18
% qoq M9FY18 M9FY17
YOY %
Net Sales
274
289
-5
296
-7.6
817
684
19.5
Other Income
0
0
116
0
57.7
3
1
235.4
Raw Material Consumed
156
150
4
208
-24.9
530
397
33.6
Stock Adjustments
-1
-1
-20
-23
-94.5
-37
-24
51.1
Employee Expenses
12
14
-13
11
7.5
34
29
13.9
Other Expenses
43
50
-14
43
0.1
122
114
7.7
As a % of net sales
Raw Material Consumed
57%
52%
70%
65%
58%
Stock Adjustments
0%
0%
-8%
-4%
-4%
Employee Expenses
4%
5%
4%
4%
4%
Other Expenses
16%
17%
14%
15%
17%
Total expenditure
210
212
-1
239
-12.3
649
516
25.9
Operating profit
65
77
-16
58
12.2
171
169
1.2
OPM %
23.7%
26.7%
19.5%
20.9%
24.7%
Interest
2
3
-27
2
-11.9
6
8
-23.9
Depreciation
8
9
-3
9
-2.2
25
26
-1.1
PBT
55
66
-17
47
15.9
140
136
3.0
Tax
14
19
-26
14
3.7
39
35
10.0
Tax rate %
26%
29%
29%
28%
26%
PAT
40
46
-11
33
20.9
101
99
2.0
PAT margin %
14.8%
15.8%
11.3%
12.3%
14.5%
Source: Company, Angel Research
February 5, 2018
2
CCL products| 3QFY2018 Result Update
Outlook and Valuation
We maintain our estimates in view of robust offtake expectations of its coffee in
upcoming quarters. We expect CCL to report a revenue CAGR of ~18% over
FY18-20E mainly due to (a) higher off take from upcoming facilities in India (b)
higher B2C sales via Continental brand; and (c) better offtake in Vietnam facilities.
On the bottom-line front, we expect a CAGR of ~26% to `229cr over the same
period on the back of strong revenue and lower interest costs. Post the recent
correction, the stock is trading very attractively at 19.3x its FY19E earnings. Thus,
we maintain our Buy rating with the Target Price of `360.
Risks to our estimates
1) Inability to get break through with new clients as the volumes may get
impacted
2) Abrupt fluctuations in coffee prices may adversely impact its profitability
Company Background
CCL was founded in 1994 as an Export Oriented Unit (EOU) with the right to
import green coffee from any part of the world and export processed coffee
across the globe, devoid of any duties. The company’s instant coffee
manufacturing plant is located at Guntur District, Andhra Pradesh, with a
current combined capacity of 20,000MT/PA. CCL also has a plant in Vietnam
with a total capacity of 1,0000MT for instant coffee and 5000MT for liquid
coffee. CCL’s 3,000MT plant in Switzerland is facing issues on account of
unfavorable European Union regulations.
Major clientele and geographies
The major countries contributing to CCL’s export revenue are Italy, Russia,
Belgium, Japan Germany, China etc. A few private labels served by CCL
include Mokate, Instanta, Food Empire, Strauss, DEK, Gold Roast, etc.
Presently, the company provides over 200 varieties and blends of coffee to its
customers in over 90 countries.
February 5, 2018
3
CCL products| 3QFY2018 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2017
FY2018E
FY2019E
FY2020E
Total operating income
976
1165
1408
1608
% chg
5
19
21
14
Total Expenditure
743
920
1092
1238
Raw Material
552
635
730
839
Personnel
28
31
34
37
Others Expenses
163
180
198
217
EBITDA
233
245
317
370
% chg
9
5
30
17
(% of Net Sales)
24
21
23
23
Depreciation& Amortisation
33
36
41
42
EBIT
200
209
276
328
% chg
7
4
32
19
(% of Net Sales)
20
18
20
20
Interest & other Charges
11
5
4
4
Other Income
-0.11
2.00
2.00
2.00
(% of PBT)
-0.1%
1.0%
0.7%
0.6%
Share in profit of Associates
-
-
-
-
Recurring PBT
189
206
274
326
Tax
55
62
82
98
(% of PBT)
28.9
30.0
30.0
30.0
PAT (reported)
134
144
192
229
% chg
10
7
33
19
(% of Net Sales)
14
12
14
14
Basic EPS (Rs)
10.1
10.8
14.4
17.2
Fully Diluted EPS (Rs)
10.1
10.8
14.4
17.2
% chg
10
7
33
19
February 5, 2018
4
CCL products| 3QFY2018 Result Update
Balance Sheet
Y/E March (` cr)
FY2017
FY2018E
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
27
27
27
27
Reserves& Surplus
610
710
853
1028
Shareholders Funds
636
736
880
1055
Minority Interest
Total Loans
142
142
122
102
Total Liabilities
778
878
1002
1157
APPLICATION OF FUNDS
Gross Block
643
743
843
943
Less: Acc. Depreciation
250
286
327
368
Net Block
393
458
517
575
Capital Work-in-Progress
0
0
0
0
Investments
2
2
2
2
Current Assets
404
443
508
606
Inventories
183
201
221
243
Sundry Debtors
163
171
189
207
Cash and Bank
17
27
53
107
Loans and Advances
42
44
46
48
Current liabilities
39
43
45
48
Net Current Assets
365
400
463
559
Deferred Tax Asset
-31
-32
-34
-36
Other Assets
49
52
55
57
Mis. Exp. not written off
-
-
-
-
Total Assets
779
879
1002
1157
February 5, 2018
5
CCL products| 3QFY2018 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2017
FY2018E
FY2019E
FY2020E
PBT
189
206
274
326
OCF before chg in WC and tax
226
244
317
370
Adjusted for:
Change in WC
(67)
(20)
(32)
(118)
Taxes paid
(53)
(62)
(82)
(98)
Others
0
0
0
0
Cash flow from operations
105
162
202
155
Investment in assets
(20)
(100)
(100)
(20)
Other investments/sales
0
Investing Cash Flow
(20)
-100
-100
-20
Borrowings
(68)
0
(20)
(20)
Equity issuances
0
0
0
0
Dividends paid
(13)
(44)
(48)
(53)
Interest paid
(4)
(5)
(4)
(4)
Others
(3)
(3)
(3)
(4)
Financing Cash Flow
(87)
(52)
(76)
(80)
Net Change in Cash
(2)
10
26
54
Opening Cash
19
17
27
53
Closing Cash
17
27
53
107
Free cash flow
85
62
102
135
February 5, 2018
6
CCL products| 3QFY2018 Result Update
Key Ratios
Y/E March
FY2017
FY2018E
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
27.5
25.7
19.3
16.2
P/CEPS
22.1
20.6
15.9
13.7
P/BV
5.8
5.0
4.2
3.5
EV/Sales
3.9
3.3
2.7
2.3
EV/EBITDA
18.1
16.4
15.5
11.9
EV / Total Assets
9.7
8.3
7.3
6.5
Per Share Data (Rs)
EPS (Basic)
10.1
10.8
14.4
17.2
EPS (fully diluted)
10.1
10.8
14.4
17.2
Cash EPS
12.6
13.5
17.5
20.3
DPS
2.5
2.8
3.0
3.3
Book Value
47.8
55.4
66.1
79.3
Returns (%)
ROCE
27.5%
25.9%
30.1%
31.0%
Angel ROIC (Pre-tax)
26.3%
24.6%
29.1%
31.3%
ROE
21.1%
19.6%
21.8%
21.7%
Turnover ratios (x)
Asset Turnover (Gross Block)
2.5
2.5
2.7
2.8
Inventory / Sales (days)
62
60
55
53
Receivables (days)
54
52
47
45
Payables (days)
22
16
15
14
Working capital cycle (ex-cash)
94
96
87
84
(days)
Source: Company, Angel Research
February 5, 2018
7
CCL products| 3QFY2018 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
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make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
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or in connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
CCL Products
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
February 5, 2018
8
