CCL Products Share Price Analysis

[Date: 22-Oct-2019] CCL Products is a company which manufactures “Instant Coffee”. They have two manufacturing plants in India (Andra Pradesh), Switzerland, and Vietnam.

As on Sep’19, the promoters are holding 45.28% stake in the company.

Current Price Trend

In last 12 months, the price of this stock has been continuously falling. Please check the Simple Moving Average (SMA) trend visible in last 12 months.

SMA has fallen from Rs.260 to Rs.227 levels. This is a drop of 12.7%.

Though this drop is not so high, but when I saw its EPS trend in last 12 months, I was surprised.

CCL Products Share Price Analysis - EPS Trend
These are Quarterly EPS’s

In its reported last 4 quarters (12 months), EPS of CCL products has risen from Rs.2.12 per share to Rs.6.18 per share. This is a growth of 191%.

On one side where EPS has almost tripled (191%) in last 12 months, its share price has fallen by 12%.

In terms of earnings, there was no reason why the price of such a stock should have fallen. Instead, it should have been an ideal candidate for a bullish run.

Moreover, The current price of stock (NSE: Rs.227 per share) is trading very close to its 52W Low price.

Hence, I thought to do a more detailed analysis of CCL Products using my stock analysis worksheet.

Result of Stock Analysis

The first two things which is immediately visible in the report was these:

  1. Intrinsic Value: At a point where this stock is trading at a current price of Rs.227, its estimated intrinsic value is Rs.228. This price difference makes this stock slightly undervalued. Read: Intrinsic value.
  2. Overall Score: A stock which scores an overall rating of 85%+ and is also undervalued, can be considered as a good bet. CCL Product was able to fetch an overall score of 97%. Read: How Warren buffett thinks about stocks.

Growth

In terms of past growth rates, performance of this stock has been decent:

Though EPS growth in last 10 years is in negative, but other fundamentals like reserves, income, PAT and dividend growth has been robust.

The cause of worry could be “expense growth” higher that “income growth” in last 10 years time horizon.

This is an indication of reducing profitability.

Profitability

In terms of profitability, current ROE, RoCE values of CCL Products is good. Even its net profit margin (PAT margin) is above 20%.

This means that, though in last 10 years, the profitability of the company has reduced, but it is still showing healthy numbers.

When the size (turnover/sales) of the company grows, it is only fair to accept a small compromise in its profitability.

Size of Company

In last 10 years, Net sales of the company has growth from Rs.281 Crore to Rs.809 Crore. This is a growth of 11.7% p.a.

In the same period, the size of net profit (PAT), of the company has grown from Rs.25.9 Crore to Rs.125 Crore. This is a growth of 17% p.a.

In the same period, the size of net worth, of the company has grown from Rs.200 Crore to Rs.650 Crore. This is a growth of 12%+ p.a.

Conclusion

Overall it looks like, CCL Product is a decent stock which I can be put my bets on.

I personally feel that, from the present price levels, jump of 12-15% in next 6 months looks fair.

Moreover, I’ve not seen many stock which was able to earn an overall score of 97%+ from my stock analysis worksheet.

  • Recos: Axis Direct (11-Sep’19): Buy@Rs.243, Target@Rs.284, Upside: 16%.

2 Comments

  1. Your analysis on CCL Product is awesome based on data collection applying tools ratio etc .Thank you .

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