Results hit due to maintenance issues. Future Assured.
Consolidated Revenues for the quarter grew by 23% YoY but were down by 14.4% QoQ at Rs. 177 crore. Sales were below expectations due to trial runs and testing made at the Vietnam plant and some maintenance issues at the Indian plant. In addition, production at Vietnam plant also got affected by 10-12 days due to Chinese New year holidays. Vietnam plant has re-gained operations from the end of April 2013. Company would be adding another 5000 MT capacity by Sep 2013 in Vietnam taking the total capacity to 15000 MT. For FY14E, management expects to produce 6500 MT at the Vietnam plant. CCL operates a 3000 MT plant in Switzerland where it adds value addition to the products. Operations from this unit have been lackluster during the quarter since the Swiss government has imposed additional duty. EBIDTA margins have remained flattish QoQ at 20.8% (despite high power cost) as the company was able to stock up beans when the prices were lower. Coffee prices have remained stable during the quarter. PAT was lower by 25% YoY at Rs.10.9 crore due to higher taxes (39% of PBT) during the quarter. Management expects this to be lower in FY14 since Vietnam would start making profits in FY14E.
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Consolidated Revenues for the quarter grew by 23% YoY but were down by 14.4% QoQ at Rs. 177 crore. Sales were below expectations due to trial runs and testing made at the Vietnam plant and some maintenance issues at the Indian plant. In addition, production at Vietnam plant also got affected by 10-12 days due to Chinese New year holidays. Vietnam plant has re-gained operations from the end of April 2013. Company would be adding another 5000 MT capacity by Sep 2013 in Vietnam taking the total capacity to 15000 MT. For FY14E, management expects to produce 6500 MT at the Vietnam plant. CCL operates a 3000 MT plant in Switzerland where it adds value addition to the products. Operations from this unit have been lackluster during the quarter since the Swiss government has imposed additional duty. EBIDTA margins have remained flattish QoQ at 20.8% (despite high power cost) as the company was able to stock up beans when the prices were lower. Coffee prices have remained stable during the quarter. PAT was lower by 25% YoY at Rs.10.9 crore due to higher taxes (39% of PBT) during the quarter. Management expects this to be lower in FY14 since Vietnam would start making profits in FY14E.
Valuation & Recommendation
Current quarter results were below our expectations. Though sales have got affected due to maintenance issues we believe this is a temporary issue and would be resolved in the coming quarters. Margins however have grown 100 bps in FY13 to 19.2% and we believe these are sustainable with the company adding superior quality products into the portfolio.
First quarter is a seasonally weak quarter for the company; however with increase in capacities we can see good growth in YoY numbers. The stock has corrected post its Q4FY13 results and at CMP it is trading at 5.6x its FY14E earnings which look attractive. We continue to be positive on the stock and maintain BUY rating; however has reduced our target price to Rs. 375 (earlier target price was Rs. 400) due to lower Q4FY13 performance.
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