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Dalal Street Investment Journal - - CONTENTS -

HERE IS WHY El­e­vated global cof­fee prices Ca­pac­ity ex­pan­sion De­mand for ag­glom­er­ated cof­fee in Viet­nam

CCL Prod­ucts (In­dia) Limited is en­gaged in the busi­ness of man­u­fac­tur­ing in­stant cof­fee. It op­er­ates in the cof­fee and cof­fee-re­lated prod­ucts seg­ment. The com­pany pro­duces sol­u­ble in­stant spray dried cof­fee pow­der, spray dried ag­glom­er­ated/ gran­u­lated cof­fee, freeze-dried cof­fee and freeze con­cen­trated liq­uid cof­fee. It sup­plies flavoured cof­fee, de­caf­feinated cof­fee, or­ganic cof­fee, rain­for­est cof­fee, fair trade cof­fee, dual and triple cer­ti­fied cof­fee, as well as chicory-cof­fee mix.

The com­pany's brands in­clude Con­ti­nen- tal Spe­cial, Con­ti­nen­tal Pre­mium and Con­ti­nen­tal Supreme. The com­pany's sol­u­ble in­stant cof­fee man­u­fac­tur­ing plant has a ca­pac­ity of 35,000 met­ric tonnes per an­num.

On the fi­nan­cial front, CCL Prod­ucts (In­dia) posted a 113.15 per cent rise in the rev­enue to ₹216.69 crore in the sec­ond quar­ter of FY18 as against ₹101.66 crore in Q2FY17. The com­pany’s PBIDT grew by 141.61 per cent to ₹43.60 crore in Q2FY18 as against

₹18.05 crore in the same quar­ter of the pre­vi­ous year. The net profit of the com­pany rose 179.12 per cent to ₹25.67 crore in Q2FY18 as against ₹9.20 crore in Q2FY17.

On the an­nual front, the net sales of the com­pany in­creased 4.46 per cent to ₹707.39 crore in FY17 on a year-on-year ba­sis. The com­pany’s PBIDT grew 21.36 per cent to ₹169.33 crore in FY17, as against ₹139.53 crore in the pre­vi­ous fis­cal. The net profit of the com­pany in­creased 20.44 per cent to ₹98.69 crore in FY17 as com­pared with ₹81.94 crore in FY16.

On the val­u­a­tion front, the com­pany is trad­ing at a PE ra­tio of 30.12x, while the in­dus­try PE stood at 37.53x. Its re­turn on cap­i­tal em­ployed (ROCE) stood at 26.53 per cent, whereas its re­turn on eq­uity (ROE) was 19.9 per cent.

The com­pany’s en­hanced pro­duc­tion ca­pac­ity at its Dug­gi­rala plant in Guntur dis­trict of Andhra Pradesh, cou­pled with its multi-di­men­sional pres­ence will help the com­pany tap the in­creased de­mand for cof­fee in the in­ter­na­tional mar­kets.

The com­pany’s flour­ish­ing pres­ence in Viet­nam en­ables it to cater to the strong de­mand of cof­fee from ASEAN coun­tries, in­clud­ing Ja­pan, Korea and China, among oth­ers, at lower price. This al­lows the com­pany to op­er­ate within the frame­works of the favoured na­tion sta­tus, which con­fers the ben­e­fits of re­duced or nil duty struc­tures, be­sides sav­ings on lo­gis­tics.

The com­pany is also en­hanc­ing its pres­ence in the do­mes­tic mar­ket by con­cen­trat­ing on its pri­vate la­bel seg­ment, as well as es­tab­lished brands. The sol­u­ble cof­fee con­sump­tion is ex­pected to grow over 15 per cent on a year-on-year ba­sis. We rec­om­mend the reader-in­vestors to BUY the stock.

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