CCL Products Q3 FY26: Robust Growth Momentum Continues Despite Margin Pressures

The quarterly results underscore CCL Products' ability to capitalise on robust demand in the instant coffee segment, with net sales surging 38.52% year-on-year to ₹1,050.56 crores in Q3 FY26. This impressive growth trajectory has been consistent throughout FY26, with the company delivering strong double-digit expansion across all three quarters reported thus far. The nine-month FY26 performance has been particularly noteworthy, with cumulative net sales reaching ₹3,232.93 crores, representing a substantial 45.48% increase over the corresponding period last year.

Financial Performance: Strong Growth Amid Margin Normalisation

The third quarter of FY26 presented a mixed picture for CCL Products, with robust revenue growth offset by sequential margin compression. Net sales of ₹1,050.56 crores in Q3 FY26 marked a 38.52% year-on-year surge, though the quarter witnessed a 6.76% sequential decline from Q2 FY26's ₹1,126.73 crores. This sequential dip appears tactical rather than structural, reflecting typical quarter-end dynamics in the instant coffee export business.

Operating profit before depreciation, interest, tax and other income (PBDIT excluding OI) stood at ₹184.96 crores in Q3 FY26, yielding an operating margin of 17.61%. Whilst this represents a healthy expansion of 117 basis points year-on-year from 16.41% in Q3 FY25, the sequential trajectory reveals margin pressures, with a 96 basis point contraction from Q2 FY26's 17.50%. The company's gross profit margin followed a similar pattern, settling at 14.78% in Q3 FY26 compared to 14.73% in Q2 FY26, indicating relatively stable cost management despite raw material volatility in the coffee segment.

The bottom-line performance showcased resilience, with profit after tax (PAT) margin expanding to 9.54% in Q3 FY26 from 8.31% in Q3 FY25, marking a 123 basis point year-on-year improvement. This margin expansion was facilitated by a favourable tax rate of 13.77% in Q3 FY26 compared to 12.28% in the year-ago quarter, alongside disciplined cost management. Employee costs remained well-controlled at ₹47.44 crores, representing approximately 4.52% of net sales, demonstrating operational efficiency.

Interest costs remained elevated at ₹32.24 crores in Q3 FY26, reflecting the company's substantial debt-funded capacity expansion initiatives. Depreciation charges surged to ₹39.05 crores from ₹24.80 crores year-on-year, a consequence of the aggressive capital expenditure programme undertaken to expand manufacturing capacity and enhance technological capabilities. These investments, whilst pressuring near-term profitability, position the company favourably for long-term growth in the burgeoning instant coffee market.

Capital Efficiency: Good Returns Despite Leverage Concerns

CCL Products has demonstrated commendable capital efficiency metrics, with the latest return on equity (ROE) standing at 16.21%, reflecting the company's ability to generate solid returns for shareholders despite operating in a competitive FMCG segment. The five-year average ROE of 16.37% underscores consistent profitability and efficient capital deployment. Higher ROE values indicate superior capital efficiency, and CCL Products' performance in this regard positions it favourably amongst mid-sized FMCG companies, demonstrating management's capability to convert shareholder capital into profitable growth.

Return on capital employed (ROCE) for the half-year FY26 reached a peak of 14.27%, the highest recorded level, indicating improving asset productivity. The five-year average ROCE of 14.03% suggests that the company has consistently generated adequate returns above its cost of capital, though there remains scope for improvement to match industry leaders. The latest ROCE of 15.48% reflects the positive impact of capacity utilisation improvements and operational efficiencies gained from recent capital investments.

Industry Context: Riding the Instant Coffee Wave

CCL Products operates in the dynamic instant coffee manufacturing segment, serving as the second-largest company in the broader FMCG sector by market capitalisation. The company has established a formidable presence across India, Vietnam, and Switzerland, producing both spray-dried and freeze-dried instant coffee formats. The global instant coffee market has witnessed robust growth, driven by changing consumer preferences towards convenience, premiumisation trends, and expanding café culture in emerging markets.

The company's strategic positioning in the B2B instant coffee supply chain, catering to major international brands and coffee chains, provides stable revenue visibility and insulates it partially from direct consumer market volatility. With continuous investments in state-of-the-art technology and capacity expansion, CCL Products has strengthened its competitive moat, enabling it to capture incremental market share in the global instant coffee trade.

The five-year sales compound annual growth rate (CAGR) of 26.22% significantly outpaces the broader FMCG sector growth, validating the company's market share gains and successful penetration into new geographies. This growth trajectory has been supported by favourable coffee bean pricing dynamics, operational efficiencies, and the company's ability to maintain long-term relationships with marquee global clients.

Peer Comparison: Valuation Premium Justified by Growth

CCL Products trades at a price-to-earnings (P/E) ratio of 39.55 times trailing twelve-month earnings, representing a notable premium to the FMCG sector average P/E of 23 times. This valuation premium reflects investor confidence in the company's superior growth trajectory and market leadership in the instant coffee segment. However, when compared to direct FMCG peers, CCL Products trades at a relative discount, with companies like Bikaji Foods commanding a P/E of 65.93 times and Hatsun Agro at 52.76 times.

From a price-to-book value perspective, CCL Products trades at 6.41 times, substantially lower than Gillette India's 24.47 times but higher than Avanti Feeds' 4.85 times. The company's ROE of 16.37% positions it in the middle of the peer group, trailing Gillette India's exceptional 40.86% and Emami's 29.50%, but comparable to Hatsun Agro and Bikaji Foods. The modest dividend yield of 0.50% reflects the company's strategy of retaining earnings for growth investments rather than aggressive dividend distribution.

CCL Products' debt-to-equity ratio of 0.61 times stands out in a peer group where most companies operate with net cash positions. This leverage, whilst supporting aggressive capacity expansion, differentiates CCL Products' capital structure and introduces financial risk that investors must weigh against growth prospects. The company's enterprise value to EBITDA multiple of 22.75 times appears reasonable given the strong revenue growth visibility and improving profitability metrics.

Valuation Analysis: Attractive Entry Point for Long-Term Investors

At the current market price of ₹1,021.00, CCL Products trades at an enterprise value to capital employed ratio of 4.36 times, which appears attractive considering the company's ROCE of 15.48%. This valuation metric suggests that the market is offering reasonable value for the company's capital efficiency and growth prospects. The stock has delivered exceptional returns over multiple time horizons, with a one-year return of 50.80% significantly outperforming the Sensex return of 6.55%, generating an alpha of 44.25 percentage points.

The company's current valuation grade stands at "Attractive", having oscillated between "Attractive" and "Very Attractive" over the past year based on price movements and earnings trajectory. With a price-to-book value of 6.41 times against a book value per share of ₹147.33, the stock trades at a premium that reflects investor confidence in future earnings growth and return on equity expansion.

The PEG ratio of 1.69 suggests that the stock is trading at a reasonable valuation relative to its earnings growth rate, with the metric below the threshold of 2.0 that typically indicates overvaluation. The company's five-year sales CAGR of 26.22% and EBIT CAGR of 16.07% provide strong fundamental support for the current valuation multiples, particularly when considering the visible growth runway in the instant coffee segment.

Trading near its 52-week high of ₹1,072.65, the stock has demonstrated strong momentum, currently positioned just 4.82% below this peak. The substantial distance of 114.95% from the 52-week low of ₹475.00 reflects the remarkable re-rating the stock has undergone over the past year, driven by consistent earnings delivery and improved market sentiment towards the FMCG sector.

Shareholding Pattern: Institutional Confidence Building

The shareholding structure of CCL Products reveals a stable promoter base holding 46.11% as of December 2025, unchanged from the previous quarter. This consistent promoter holding, with zero pledging of shares, demonstrates strong management confidence and alignment with minority shareholders. The promoter group, led by Challa Shantha Prasad (24.01%), Challa Srishant (10.57%), and Challa Rajendra Prasad (10.02%), maintains strategic control whilst allowing significant institutional participation.

Foreign institutional investor (FII) holding increased to 11.01% in Q3 FY26 from 10.53% in Q2 FY26, marking a sequential gain of 48 basis points. This upward trajectory in FII participation, supported by 125 foreign institutional investors, signals growing international recognition of CCL Products' growth story and competitive positioning in the global instant coffee supply chain. The year-on-year increase from 10.13% in December 2024 reflects sustained foreign investor interest.

Mutual fund holding witnessed a marginal decline to 19.22% in Q3 FY26 from 19.59% in Q2 FY26, though this remains substantially higher than the 18.38% holding in March 2025. With 28 mutual funds holding stakes, the company enjoys broad-based domestic institutional support. The sequential reduction of 37 basis points appears tactical rather than a loss of conviction, as the absolute holding remains robust and well-distributed across multiple fund houses.

The combined institutional holding of 32.54% underscores strong professional investor confidence in CCL Products' business model and growth trajectory. The minimal insurance company participation at 0.06% and other domestic institutional investor (DII) holding at 2.25% suggest potential for further institutional accumulation as the company's market capitalisation and liquidity continue to expand.

Stock Performance: Stellar Returns Across Timeframes

CCL Products has delivered exceptional shareholder returns across multiple investment horizons, significantly outperforming benchmark indices. The stock's one-year return of 50.80% dwarfs the Sensex return of 6.55%, generating a remarkable alpha of 44.25 percentage points. This outperformance extends across shorter timeframes as well, with the three-month return of 15.06% exceeding the Sensex's marginal decline of 0.08%, and the six-month return of 12.12% surpassing the benchmark's 3.33% gain.

The longer-term performance narrative becomes even more compelling, with the five-year return of 315.04% and ten-year return of 520.67% demonstrating the wealth creation potential for patient investors. The five-year alpha of 250.65 percentage points against the Sensex return of 64.39% validates the company's transformation from a mid-sized instant coffee manufacturer to a market leader with global scale and operational excellence.

From a risk-adjusted returns perspective, the stock's one-year risk-adjusted return of 1.21 compares favourably to the Sensex's 0.57, despite the higher volatility of 41.84% versus the benchmark's 11.52%. The positive Sharpe ratio indicates that investors are being adequately compensated for the additional risk, with the stock classified as "HIGH RISK HIGH RETURN". The adjusted beta of 1.35 confirms that CCL Products is a high-beta stock, amplifying market movements in both directions.

The stock's technical positioning appears constructive, trading above all key moving averages including the 5-day (₹981.13), 20-day (₹955.88), 50-day (₹963.84), 100-day (₹935.16), and 200-day (₹880.88) moving averages. This alignment suggests strong momentum and broad-based technical support. The current trend classification of "Mildly Bullish" following a change on February 1, 2026, indicates consolidation after a strong rally, with technical indicators presenting mixed signals across weekly and monthly timeframes.

Investment Thesis: Quality Growth at Reasonable Valuation

CCL Products presents a compelling investment case built on four key pillars: attractive valuation, good quality fundamentals, positive financial trends, and constructive technical momentum. The company's proprietary Mojo Score of 71 out of 100 translates to a "BUY" rating, reflecting confidence in the stock's ability to deliver sustained shareholder value over the medium to long term.

The valuation pillar is supported by the stock's "Attractive" grade, with the enterprise value to capital employed ratio of 4.36 times appearing reasonable against the ROCE of 15.48%. The quality assessment of "Good" reflects the company's healthy long-term sales CAGR of 26.22%, zero promoter pledging, substantial institutional holdings of 32.54%, and market leadership position in the instant coffee segment. The positive financial trend, driven by 45.48% half-yearly sales growth and 46.82% PAT growth, validates the ongoing business momentum.

The technical trend classification of "Mildly Bullish" suggests that whilst the stock has witnessed a strong rally, it is currently consolidating gains rather than exhibiting overbought conditions. The stock's positioning above all major moving averages provides technical support, though mixed signals from indicators like MACD (mildly bearish weekly) and OBV (mildly bearish weekly) warrant cautious optimism rather than aggressive accumulation.

Key Strengths & Risk Factors

Outlook: What to Watch Going Forward

The forward outlook for CCL Products hinges on the company's ability to sustain its impressive revenue growth trajectory whilst managing margin pressures and deleveraging the balance sheet. The global instant coffee market's structural growth tailwinds, combined with CCL Products' established relationships with major international brands, provide visibility for continued top-line expansion. However, investors must monitor quarterly margin trends closely, as sustained compression could indicate pricing challenges or structural cost inflation that may necessitate downward earnings revisions.

The company's capital allocation strategy will be critical in determining shareholder returns over the next 12-24 months. With substantial capacity additions now in place, the focus must shift towards optimising utilisation, generating robust free cash flows, and systematically reducing debt levels. Any acceleration in the deleveraging trajectory would be viewed positively by the market and could support valuation multiple expansion despite the already elevated P/E ratio.