CCL Products or CCL reported a decline in revenue by 11.8% to Rs213cr, 16.5%/15.2% lower than our/BBG estimate, respectively. Standalone operations fell down by 6% to Rs161cr as against our estimate of Rs170cr and Vietnam operations declined 25.7% to Rs52cr against our estimate of Rs85cr. Revenue declined mainly because of the fall in green coffee prices, partial shutdown of Indian plant in December 2015, deferment of export incentives to the tune of ~Rs14cr and rescheduling of contracts by customers following changes in global economic environment. With lower green coffee prices, gross margin at domestic/Vietnam operations rose 169bps/1,933bps to 42.1%/48.4%,respectively,while consolidated gross margin rose 653bps to 43.6%. Despite higher power cost and Other expenses, operating margin improved 255bps because of fall in raw material prices and increase in the share of value‐added products. Following lower revenue, operating profit was flat YoY at Rs46cr. With healthy cash flow and lower debt, interest costs declined 19% to Rs3cr. Net profit was flat at Rs26cr, 25.2%/15.3% below our/BBG. The management stated that consolidated EBITDA will be ~Rs195cr and PAT‐level growth will be at least 25% for FY16E excluding export incentives to be received from the government. We have reduced our FY16/FY17/FY18 revenue estimates by 12.5%/7%/6% to Rs864cr/Rs1,094cr/Rs1,366cr, respectively, and PAT estimates by 17.6%/11.9%/9.3% to Rs116cr/Rs161cr/Rs222cr, respectively. We maintain our BUY rating with a reduced target price of Rs301 (based on 18x FY18E) from earlier Rs369 (based on 20x FY18E).
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