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CCL Products Q4FY14 results update

May 28, 2014, Wednesday, 08:11 GMT | 03:11 EST | 11:41 IST | 14:11 SGT
Contributed by Nirmal Bang

CCL reported Q4FY14 results in line with our expectations. Revenues grew 10% QoQ and 23.5% YoY, and the margins remained flattish both QoQ and YoY. Volumes in FY15 would be higher with commercialization of the Vietnam plant. We expect the company to deliver strong performance in FY15 on the back of expansion, available tax breaks and steady growth in instant coffee consumption. We believe that since the company’s investment phase is over, it will be able to do better cash generation thus improving ROE from FY15 onwards and thus can garner better valuations. At CMP, stock is trading at a P/E of 8.6x and 6.4x its FY15E and FY16E earnings and we maintain BUY recommendation on the stock.

Q4FY14 details

- Consolidated Revenues for the quarter grew 10%/23.5% QoQ/ YoY on the back of partly commercialized Vietnam plant.

- EBIDTA margins remained flattish QoQ/YoY at 19%. Company expects the margins to improve going forward on the back of better inventory and power cost management.

- Tax rate continued to remain high at 38% on the back of Vietnam losses and would significantly reduce in FY15E.

- PAT flattish QoQ to Rs.17.8 crore on the back of higher depreciation cost.

- Vietnam’s plant would have a capacity of 13000 MT and company expects 50-60% capacity utilization for FY15E. Once the utilization peaks, management plans to increase the Vietnam capacity to 20000 MT.

Other highlights

- Company expects to enter newer markets like Japan; Korea once the production in Vietnam begins. Thus it expects 25- 30% growth in revenues in FY15.

- CCL also has plans to launch its own products in Indian markets under the brand name “continental” for which it has already made soft launch in Andhra Pradesh.

- Company has made arrangements for guaranteed Power with exchanges in Andhra Pradesh at fixed costs which is aiding to better margins for the company.