CCL Products (India) Downgraded to 'Hold' by MarketsMOJO: What Investors Need to Know

CCL Products (India) is a midcap company in the tea/coffee industry with a market cap of Rs 9,551 crore. Recently, MarketsMOJO downgraded its stock call to 'Hold' on November 12, 2024. This decision was based on various factors such as the company's high management efficiency with a ROCE of 16.85%, strong ability to service debt with a low Debt to EBITDA ratio of 1.49 times, and technical indicators showing a mildly bullish trend.
However, there are also some concerns for the stock. Despite its attractive valuation with a ROCE of 10.9 and trading at a discount compared to its historical valuations, the company's profits have fallen by -2.1% in the past year. Additionally, its long term growth has been poor with net sales growing at an annual rate of 22.14% and operating profit at 10.42% over the last 5 years.

On the positive side, CCL Products (India) has high institutional holdings at 30.32%, indicating that these investors have better capability and resources to analyze the company's fundamentals. It is also the second biggest company in the tea/coffee sector, behind Tata Consumer, and its annual sales of Rs 2,902.69 crore make up 13.68% of the industry.

In the short term, the company's results for September 24 have been flat with the lowest operating cash flow at Rs 55.38 crore and ROCE at 10.68%. The debt-equity ratio is also at its highest at 1.09 times. This has resulted in the stock underperforming the market in the last 1 year, with a return of only 9.39% compared to the market's return of 27.99%.

In conclusion, while CCL Products (India) has some positive aspects such as high management efficiency and institutional holdings, there are also concerns about its long term growth and recent underperformance in the market. Investors may want to hold off on buying or selling the stock until there is more clarity on its future performance.