Reviews
In this edition, we have reviewed CCL Products (India) Ltd. and Pidilite Industries. We suggest our reader-investors to HOLD in CCL Products (India) Ltd. and Pidilite Industries
We had recommended CCL Products (India) Ltd. in Volume 34, Issue No. 8 under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs299.45 and the stock was suggested on the basis of its positive growth prospects and a robust business model. The company is engaged in the manufacturing of instant coffee. Taking into account the financial performance of CCL Products (India) in the recent quarters, we can see that on a consolidated quarterly basis the net sales inched down by 2.14 per cent to Rs296.23 crore in Q3FY21 as compared to Rs302.72 crore in Q3FY20. The operating profit dipped by 14.61 per cent from Rs84.83 crore in Q3FY20 to Rs72.43 crore in Q3FY21. Meanwhile, the net profit increased in the quarter which came in at Rs47.11 in Q3FY21 as compared to net profit of Rs47 crore in Q3FY20 – a rise of 0.24 per cent.On an annual basis the net sales rose by 5.34 per cent from Rs1,081.42 crore in FY19 to Rs1,139.15 crore in FY20. The operating profit was seen growing by 16.71 per cent in FY20 as compared to FY19. The net profit on an annual basis rose by 7.13 per cent at Rs165.94 crore in FY20 as compared to Rs154.89 crore in FY19. CCL Products (India) has specialty coffee as its niche product. The company is world’s largest private label manufacturer with a capacity of 35000 tonnes of instant coffee and 50000 tonnes of coffee products.
The company aims to increase volumes with additional manufacturing capacities. It also has a plan to increase its product profile in the domestic market and build its brand in countries where there are no bulk volumes. Also, it will be adding value in the business by offering retail packing. Hence, we recommend HOLD.
We had previously recommended Pidilite Industries in Volume 35, Issue No. 8 under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs1,702.65 and the stock was suggested on the basis of the optimistic future plans and predicted growth for the company. Pidilite Industries is engaged in the manufacture of adhesives and glues, including rubber-based products. Looking at the financial performance of CCL Products (India) in the recent quarters, we can see that on a consolidated quarterly basis the net sales rose by 19.33 per cent to Rs2,299.02 crore in Q3FY21 as compared to Rs1,926.59 crore in Q3FY20. The operating profit increased by 31.45 per cent from Rs503 crore in Q3FY20 to Rs661.20 crore in Q3FY21. Meanwhile, the net profit surged up in the quarter at Rs444.85 crore in Q3FY21 as compared to net profit of Rs344.53 crore in Q3FY20 – a rise of 29.12 per cent.
On an annual basis the net sales rose by 3.06 per cent from Rs7,077.96 crore in FY19 to Rs7,294.47 crore in FY20. The operating profit was seen expanding by 13.9 per cent in FY20 as compared to FY19. The net profit on an annual basis rose by 21 per cent at Rs1,119.02 crore in FY20 as compared to Rs924.79 crore in FY19. In spite of seeing tightening input costs, Pidilite Industries remains cautiously optimistic on steadily improving demand recovery and expects the economy to get back to growth by early 2021. On the international front, the business focus remains on emerging markets like Asia, Africa and the Middle East where it can replicate the India-like model. The company can see growth momentum for general trade with alternate trade channels on the rise.Hence, considering strong growth outlook and robust expansion plans by the company we recommend HOLD.
(Closing price as of Mar 17, 2021)