CCL Products India Ltd. Q2 FY24 result was below of our expectations. Its Q2 FY24 sales jumped 19.9% YoY to Rs 6,076 million. Ebitda grew by 12.7% YoY to Rs 1,099 million and net profit increased by 5.3 YoY to Rs 609 million.
Despite the plant shut down at Vietnam, CCL continues to target 18-20% volume growth and 18-20% Ebitda growth in FY24. However, sharp increase in debt (to fund aggressive expansion) to over Rs 14 billion over FY23-25 remains a concern in our view.
We cut our FY24/FY25 Ebitda forecast by 3%/6% but still expect 19% Ebitda compound annual growth rate over FY23-25. However, given rising levels of debt we now value the stock at a price-to-earnings of 24 times (earlier 26 times) FY25E earning per share to derive a target price of Rs 707 (earlier Rs 822) and downgrade the stock to a ‘Hold’ rating from a ‘Buy’ earlier.