Sector Outlook: Positive
Strong Execution with Upgraded Growth Outlook
CCL Products Ltd. reported a solid operating performance in Q3FY26, marked by strong year-on-year growth across profitability metrics, driven by healthy volume traction, improving operating leverage, and continued strength in export-led demand. Revenue increased sharply to Rs. 1,050.6 crores, up 38.5% YoY, reflecting sustained order inflows from key global clients, although revenues declined 6.8% QoQ due to a high base in the previous quarter and normal seasonality. Gross profit grew 27.9% YoY to Rs. 389.4 crores, with gross margins moderating to 37.1% compared to 40.1% last year, primarily on account of elevated green coffee prices and cost pass-through lag. At the operating level, EBITDA rose to Rs. 185.0 crores, with EBITDA margins expanding to 17.6% from 16.4% a year ago, supported by scale benefits, operational efficiencies, and better capacity utilisation. The margin improvement despite softer gross margins highlight the company’s ability to manage costs effectively and extract operating leverage. Profit after tax surged 59.0% YoY to Rs. 100.3 crores, with PAT margins improving to 9.5% from 8.3% in the previous year, aided by stronger operating performance and controlled finance costs, though PAT remained broadly flat on a sequential basis. The company also declared an interim dividend of Rs. 2.75 to be recorded on February 10, 2026.
Valuation and Outlook
CCL Products Ltd. reported a solid operating performance in Q3FY26, marked by strong year-on-year growth across profitability metrics, driven by healthy volume traction, improving operating leverage, and continued strength in export-led demand. Revenue increased sharply to Rs. 1,050.6 crores, up 38.5% YoY, reflecting sustained order inflows from key global clients, although revenues declined 6.8% QoQ due to a high base in the previous quarter and normal seasonality. Gross profit grew 27.9% YoY to Rs. 389.4 crores, with gross margins moderating to 37.1% compared to 40.1% last year, primarily on account of elevated green coffee prices and cost pass-through lag. At the operating level, EBITDA rose to Rs. 185.0 crores, with EBITDA margins expanding to 17.6% from 16.4% a year ago, supported by scale benefits, operational efficiencies, and better capacity utilisation. The margin improvement despite softer gross margins highlight the company’s ability to manage costs effectively and extract operating leverage. Profit after tax surged 59.0% YoY to Rs. 100.3 crores, with PAT margins improving to 9.5% from 8.3% in the previous year, aided by stronger operating performance and controlled finance costs, though PAT remained broadly flat on a sequential basis. The company also declared an interim dividend of Rs. 2.75 to be recorded on February 10, 2026.
Key concall Highlights
Guidance and Outlook
- Management upgraded FY26 EBITDA growth guidance to ~25% from the earlier 15-20%, driven by strong volume traction and operating leverage.
- FY27 EBITDA growth guidance of 15-20% has been maintained, with a clearer update expected once coffee price trends stabilise.
- Long-term focus remains on sustaining EBITDA per kg at Rs. 135-140 levels.
Margins and Profitability
- EBITDA per kg improved to Rs. 135-140, supported by the company’s cost-plus pricing model, which protects margins from coffee price volatility.
- India branded business continues to operate at 5-8% margins, with profits being reinvested to drive faster growth and market penetration.
- Vietnam margins improved due to better utilisation of freeze-dried capacity, which was underutilised last year.
Capacity and Expansion
- Overall capacity utilisation stood at 65-70% in Q3FY26.
- Management expects utilisation to reach 85-90% over the next two years, post which capacity expansion or strategic partnerships will be evaluated.
- Small pack capacities (sticks and sachets) are nearing peak utilisation, prompting near-term modular expansion plans.
Green Coffee Prices and Input Costs
- Green coffee prices remained stable in the Rs. 3,600-4,000 range, significantly lower volatility versus last year.
- Post Vietnam Tet holidays, some price volatility could emerge, though Brazil crop outlook remains favourable.
- Cost-plus model ensures EBITDA per kg remains insulated even if coffee prices soften.
Working Capital and Debt
- Softening coffee prices have enabled lower green coffee inventory holding, aiding working capital efficiency.
- Debt reduction continues despite strong volume growth, supported by improved inventory management and faster customer realisations.
- FY26 gross debt guidance maintained at Rs. 1,250 crores, with current levels tracking better than planned.
India Branded and Private Label Business
- India branded coffee business is growing 40–50% YoY, with FY26 sales expected at Rs. 30–40 crores, and total India sales around Rs. 50 crores.
- Distribution expanded pan-India with presence across 1,40,000 outlets, moving beyond South India.
- On e-commerce and modern trade platforms, CCL is a top 2-3 player, with double-digit market share on platforms like Blinkit and Reliance
Market Position and Competition
- At peak utilisation, CCL expects to achieve 12–13% global market share in the outsourced instant coffee segment.
- The company continues to outgrow the industry due to a diversified client base, strong servicing capabilities, and cost-efficient operations.
- Southeast Asia remains a key growth region, with strong presence in 2-in-1 and 3-in-1 coffee products.
Market Position and Competition
- novation remains core, with continued focus on specialty instant coffee, freeze-dried variants, and micro-grinds.
- The plant-based meat segment has been discontinued due to weak demand.
- New categories such as traditional snacks under the Malgudi brand are being piloted on a limited scale.
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