The Hindu Business Line : CCL Products gains on expansion, Q1 results

THE share price of CCL Products, a company into coffee business, has been on an upturn during the last few days due to its expansion of varied coffee products and good June quarter results.

Its shares have moved up by 77 per cent in the last one month alone. In today's trading, the stock was locked in 5 per cent upper circuit at Rs 354.70 on the BSE. On the NSE, it closed at Rs 356.20 with volumes of 13,393 shares.

For the June quarter, its net profit rose 94 per cent to Rs 7 crore from Rs 3.6 crore a year ago, while its net sales rose 81 per cent to Rs 27.5 crore from Rs 15.2 crore for the same period.

"CCL is in the midst of major expansion plans. It is increasing its present spray-dried capacity and diversifying its product mix to include freeze-dried and freeze concentrated liquid coffee and considering overseas locations for production of instant coffee," said Mr Bhavin Chheda, Senior Analyst, Pioneer Intermediaries, which has put a buy recommendation on the stock.

It has expanded its spray-dried capacity from 3,600 tonne per annum (tpa) in 2003 to current levels of 6,000 tpa and further increasing the capacity by at least 1,000 tpa every year to attain a size of 10,000 tpa, within the next 4 years. The total capital expenditure for the same is estimated at around Rs 25 crore.

CCL is also setting up a freeze-drying plant with capacity of 1,500-2,000 tpa, which is expected to go on stream by September. CCL is also producing freeze concentrated liquid coffee on a trial basis at its present facility and expects to commercialise the same by end of this fiscal.

"Japan is the major market for this product and it commands a huge premium (of almost $10/kg) over conventional freeze and spray dried instant coffee," Mr Chheda said.

"After completion of the expansions, CCL will be capable of offering a complete range of instant coffee products, that is, powder, agglomerated, cappuccino, freeze-dried and freeze concentrated liquid coffee. This would enable it to tap new markets, widen its customer base and increase its market share and profitability."

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