Shares of multibagger CCL Products fell another 2% in Monday’s intraday trade on 19 October, dropping to ₹983, their lowest level in seven months, as the earnings-led sell-off extended into its second day.
The losses have pushed the stock into negative territory for October, with shares declining 3.4% so far this month and falling 11% from the monthly high. The company reported its September-quarter results on Thursday, with the numbers coming in below Street estimates as weak coffee prices weighed on performance.
What weighed on CCL Products’ September-quarter performance?
The company reported 7.5% year-on-year revenue growth, driven by double-digit volume growth of 10–15%, although lower coffee prices weighed on realizations.
Gross margin expanded by 339 basis points to 37.9%, supported by a favorable FDC mix, while EBITDA grew 7.6%, with margins remaining stable at 17.5%, as higher freight and insurance costs offset gains in gross profit.
Management expects to recover the incremental costs through price revisions. Demand for FDC continues to outpace that for SDC, supported by premiumization and new customer additions. With its 17,000 MT FDC capacity approaching full utilization over the next year, management expects to update its expansion plans by the end of Q4FY27 or early Q1FY28, potentially through a strategic partnership.
Improved stability in coffee prices has also enabled the resumption of longer-term customer contracts, enhancing demand visibility. Near-term performance will depend on the extent of cost pass-through, coffee price movements, and timely capacity expansion.
Why has Axis Direct retained its buy rating despite the correction?
Despite the stock’s negative reaction to the results, domestic brokerage firm Axis Direct has maintained its ‘Buy’ rating on CCL Products in its latest note, citing the company’s intact long-term growth prospects and the recent correction in its share price.
However, the brokerage has trimmed its estimates, resulting in a lower target price of ₹1,255 per share, down from its earlier target of ₹1,425.
Green coffee prices remain steady in the US$3,400–3,800 per tonne range, exhibiting limited volatility ahead of the upcoming harvest. The market trajectory hinges on the arrival of Vietnam’s crop in November–December, which is expected to influence future price movements, the brokerage said.
Does CCL Products’ long-term multibagger performance remain intact?
Although the stock has declined for four consecutive months, it continues to retain the multibagger gains accumulated over the past several years. Over the last five years, the shares have delivered a gain of 142%. Over the past decade, the stock has risen by 300%.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
