CCL Products (India) Ltd has delivered an impressive operational performance in Q4 FY25, positioning itself as a robust long-term compounder in the mid-cap FMCG and agri-processing space. LKP Research has reiterated its ‘Buy’ rating on the stock with an upgraded 12-month target price of Rs844, implying a 22% upside from the current market price of Rs694. The firm’s asset-light model, deep vertical integration, premiumization strategy, and Vietnam capacity ramp-up underpin its bullish view. Management’s reaffirmed guidance of 15–20% EBITDA growth and 10–20% volume expansion over the medium term adds further conviction.

Robust Q4 Performance: Margins Expand Despite Input Cost Pressures

Revenue grew 15.1% year-over-year in Q4 FY25 to Rs8.4 billion, while EBITDA surged 38% to Rs1.6 billion, leading to a 328 bps expansion in EBITDA margin to 19.5%. This marked the highest margin level in eight quarters, largely driven by favorable product mix, operational leverage, and a strategic shift toward higher-margin segments.

Profit after tax rose 56% YoY to Rs1.0 billion, with PAT margins climbing to 12.2%, the best in the past seven quarters. The margin resilience came despite persistently high global coffee prices, which management managed adeptly through forward contracts, long-standing supplier relationships, and inventory hedging.

Continental Coffee Pushes Branded Revenue to New Heights

The branded business clocked Rs2.1 billion in revenue, up 20% YoY, and now accounts for approximately 10% of total revenue and 42% of domestic sales. The flagship brand, Continental Coffee, continues to gain traction across both general and modern trade channels.

Distribution has scaled sharply with 120,000 general trade outlets, 3,500 modern retail stores, and 90% coverage of quick commerce dark stores. As a result, South India’s contribution to total sales has dropped from 80–85% to 65–70%, reflecting significant geographic diversification.

Domestic B2C Segment Accelerates

Domestic revenue grew 13% to Rs5.03 billion in FY25, with branded contributions accounting for nearly 6.8% of overall company turnover. Product innovation, expanded retail reach, and semi-urban engagement helped power this growth.

The company continues to pivot from B2B bulk exports toward higher-margin B2C offerings. Branded coffee typically enjoys 1.5x to 2x higher EBITDA per kg, serving as a key lever for long-term margin expansion.

Capex and Debt: Working Capital Stress Nearing Peak

CCL closed FY25 with Rs18.13 billion in total debt, up from Rs16.21 billion in FY24, largely driven by green coffee inventory financing. Notably, Rs12.56 billion (69%) of the debt is short term, backed by confirmed customer orders.

Management maintains that this is operational, not speculative borrowing, and expects normalization from FY26 as coffee prices stabilize. On the capex front, CCL spent Rs6.6 billion in FY25, predominantly on its Vietnam subsidiary Ngon Coffee, which now operates a new 3,500 MT freeze-dried unit, lifting total capacity to 77,000 MT.

The company also greenlit a Rs150 million investment in a hybrid power SPV, reinforcing its focus on cost efficiency and sustainability.

Strategic Growth Levers: Vietnam, Premiumization, and Global Reach

The Vietnam plant operated at just 15% utilization in FY25, offering enormous headroom for FY26 and beyond. The contribution of specialty coffee has already crossed 5% of revenue, and this high-margin vertical is expected to scale rapidly.

CCL aims to raise total installed capacity to 100,000 MT by FY27, ensuring the backbone for volume-led growth remains intact. International expansion is also gathering pace, with notable momentum in India, China, the Middle East, and emerging markets like Taiwan and Africa.

Valuation and Financial Outlook: Margin Defense and Earnings Growth Intact

LKP values the stock at 25x FY27E EPS of Rs34, arriving at a target price of Rs844. Their thesis is built on a CAGR of 19% in revenue, 20% in EBITDA, and 19% in PAT between FY24 and FY27.

Key forecast metrics are as follows:

Risks to Monitor

Raw material volatility: Coffee bean prices remain unpredictable; supply shocks in Brazil or Vietnam could affect margins.

Climate risk: Weather-related disruptions may impact crop availability and logistics.

Working capital pressures: Inventory-heavy periods tied to coffee price spikes may stretch short-term debt and liquidity.

Bottomline for Investors: CCL Remains a Long-Term Compounding Story

CCL Products’ ability to manage cost inflation, expand high-margin branded businesses, and scale global capacity makes it a standout in India’s consumer agri-export segment. The company’s disciplined debt strategy, volume visibility, and brand traction point to continued earnings momentum.

With valuation comfort, operational excellence, and visible growth levers across Vietnam, specialty coffee, and B2C, investors seeking stable compounding stories in mid-cap FMCG may find CCL a strong brew indeed.