Technology

CCL Products Limited (CCL) is the largest Indian manufacturer and exporter of instant coffee. With a total capacity of 35,000 TPA (tonne per annum), the company has a global market share of ~6.5%. It also has a leading market share of 24% in Indian instant coffee exports CCL exports (contributing over 90% to revenue) to over 90 countries, which have helped in registering 14% CAGR in revenue and 30% CAGR in PAT over FY2012-17.
Outlook & Valuation: CCL is likely to maintain the 17%+ growth trajectory over FY18-20 backed by capacity expansion and new geographical foray. In H1FY18, the company faced some margin pressure while acquiring new clients, which we have factored in our model. However, according to us, the margin pressures would ease from FY19 onwards, once the relationship is established. The stock is currently trading at 21x FY19 EPS, which offers good opportunity to enter the stock. We initiate coverage on CCL with a Buy recommendation and Target Price of `360 (25x FY19E EPS), indicating an upside of ~20% from the current levels.

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