CCL Products shares fall 9% on Q2 results; brokerages see up to 30% upside

CCL Products (India) Ltd shares fell 9% at the day's low on Friday after the coffee maker reported its September-quarter results, with higher operating expenses weighing on profitability. However, Choice Institutional Equities and Nirmal Bang Institutional Equities maintained their positive ratings on the stock, setting target prices that indicate potential upside of around 28-30% from the respective share prices cited in their reports.

For Q2FY27, CCL Products reported consolidated revenue of ₹1,210.8 crore, up 7.5% year-on-year (YoY) and 0.9% sequentially. Ebitda rose 7.6% YoY to ₹212.1 crore, while the Ebitda margin remained broadly flat at 17.5%. Net profit increased 29% YoY to ₹130.1 crore, supported by lower interest costs and a lower effective tax rate compared with the year-ago quarter. However, higher other expenses, which increased 35.9% year-on-year, weighed on operating profitability.

CCL Products shares touched a low of ₹988, down around 9% from their previous close of ₹1,083.15. The stock opened at ₹1,059.95 and also touched a high of ₹1,059.95. It closed at ₹1,006.60, down 7.07% for the session.

What did brokerages say?

Choice Institutional Equities maintained its Buy rating on CCL Products and set a target price of ₹1,300, against the ₹1,002 share price cited in its report, implying potential upside of 30%. The brokerage said revenue growth was broadly in line with estimates, driven by double-digit volume growth and continued momentum in the branded business. However, profitability came in below expectations because of higher operating expenses.

Choice noted that revenue growth was lower than volume growth because softer green coffee prices reduced realisations under the company's cost-plus pricing model. It also highlighted higher freight costs, lower forex gains and other expenses as factors weighing on operating profitability. The brokerage said the company had maintained its FY27 guidance of 15% growth in both volume and Ebitda , citing a "'wait and watch' approach adopted by customers."

Nirmal Bang Institutional Equities also maintained its Buy rating, with a target price of ₹1,400 against the ₹1,092 share price cited in its report, implying potential upside of 28%. The brokerage said CCL Products' operating performance was broadly in line with estimates, with consolidated revenue rising 7.5% YoY and gross profit increasing around 18%. It highlighted strong order visibility for the second half of FY27 and management's aspiration to sustain double-digit volume growth.

What is the outlook for FY27?

Management maintained its guidance for around 15% volume growth and 15% Ebitda growth for FY27. Choice said the company's order book for the December and March quarters remained robust, supporting the volume-growth outlook despite customers taking a cautious approach to longer-term contracts amid uncertainty over green coffee prices.

The branded business continued to perform well, with revenue of ₹140 crore during the quarter. Choice noted that management retained its FY27 branded-business revenue guidance of ₹550-600 crore, supported by distribution expansion in southern India and growth in northern and western markets. Nirmal Bang also highlighted the potential for continued growth from the branded business, alongside improvements in product mix and lower interest costs.