CCL Products - Stellar Quarter; Outlook Upbeat; Result Update Q2FY15 :: Edelweiss report

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CCL Products’ (CCL) Q2FY15 consolidated sales, EBITDA and PAT growth of 48.9%, 44.0% and 56.9% YoY beat our estimate of 22.4%, 22.6% and 32.7%, respectively. Improvement in standalone volume led to better-than-expected results. Key positives were: (1) standalone volumes moved up ~29% YoY; (2) newly commissioned Vietnam facility ramp up is on track, volumes spurted ~22% QoQ; and (3) Continental brand is doing well. Key negative was gross debt stood higher by INR0.42bn from March 2014 levels, primarily owing to higher inventory which built up ahead of a peak quarter. It is expected to liquidate in H2FY15. Management maintained volume guidance of 20,000MT and 25,000MT for FY15 and FY16 respectively, primarily driven by capacity ramp up in Vietnam. We believe that a resilient business model, capacity augmentation in Vietnam and sharpening brand focus in India places CCL in a sweet spot to post sales and PAT CAGR of 25.5% and 54.3% over FY14-16E, respectively. We estimate RoE to improve from 20.4% in FY14 to 31.6% in FY16. This, coupled with strong free cash flow and inexpensive valuations, portends strong re-rating potential.

Strong show

CCL’s consolidated revenue grew 48.9% YoY primarily on better standalone volumes (up ~29% YoY) and contribution from newly commissioned Vietnam plant (started contributing since Q3FY14). Standalone and Vietnam realisations fell by ~2% YoY and ~1% QoQ, respectively. Consolidated EBITDA margin slipped by 60bps YoY to 19.6%. PAT stood at INR0.26bn versus estimate of INR0.22bn.

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https://www.edelweiss.in/research/CCL-Products--Stellar-Quarter;-Outlook-Upbeat;-Result-Update-Q2FY15/27390.html