We covered Tata Consumer in last week of July around 400 area and stock recently did 590+ and in market weakness stock pulled back. Tata Consumer owns 57%+ in Tata Coffee. By way of owning Tata Consumer we have exposure to tea, coffee, salt, spices and other FMCG businesses of Tata group.
#TataConsumer is good at 400-410 in top quality consumption ATH story. Remember, a stock that is near it’s all time high will continue to be so making new ATHs surprising you on the upside. Such stocks to be added near support or at 200 DMA level.#HappyInvesting#BhartiyNiveshak pic.twitter.com/vIpI45X2D6
— भारतीय निवेशक || Upgrade Your Life || (@BhartiyNiveshak) July 25, 2020
Today we are not going to talk about Tata Consumer and there is not much to talk about it except technical in any case. We are here to talk about a pure play coffee company which has 10% market share in instant coffee globally and in India around 37%. Market cap is just under 3500 Cr and with 170 Cr PAT it is trading around 20 PE.
The stock we are talking about is CCL Products. We already gave the call on the stock, expect it to consolidate for a while before zooming up.
If you see the above chart, just before corona came stock was in the reckoning and in Dec 2019 started running from 180 levels to 248 and then market came crashing down and as result CCL fell to 135 level in March lows. On 25th May stock made a big green candle and touched 212 and since then it has been holding up quite well although no spectacular run either. Accumulation range is from 240-265. Below 230 there could be some short term trouble. Trading bets can have SL CB 230. For medium term bets having a year or more as horizon there is not much to worry.
Debt to equity is around 0.5 so not really worrisome, stock has considerable institutional buying so it is not really unknown in that regard, OPM has been improving in last few years, ROCE/ROE are comfortably above cost of capital(above 15%) and promoters have been increasing stake since Sep 2019. Company is moving away from B2B to B2C. New capacity to come up in FY21-22. Given the shift from B2B to B2C, economies of scale due to being biggest private label coffee manufacturer globally, and sales growth of 10% can make its PAT around 250+ Cr in 2 years and stock has potential to double in 2-2.5 years.
You might check their coffee brands such as Malgudi, XTRA, Speciale, Black Edition, THIS(quick coffee mix like Hazelnut, Caramel, Cappuccino), Specialty coffee(such as Lemon, Spice, Coconut, Hazelnut flavoured) which are available on eCommerce and retail stores. Do let us know if you try their brands.
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