Buy CCL Products India with a revised target price

CD Equisearch Pvt Ltd | May 21, 2019, 4:16 p.m.

The stock currently trades at 22.5x FY19 EPS of Rs 11.64 and 18.7x FY20e EPS of Rs 13.97. Setting up agglomeration unit in India is aimed at enhanced value addition for agglomerated products generally command 4-5% higher margins compared to spray dried products. Customization holds key for margin gap between bulk and small packs vary widely. Thanks to enhanced value addition and increased volumes, earnings would growth in high teens in current fiscal. On balance, we retain our buy recommendation on the stock with revised target of Rs 321 (previous target: Rs 349) based on 23x FY20e earnings (average three year historical P/E:~28x), over a period of 6 months. 

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